TA, if you think these baby step hikes are going to cool anything, you are mistaken. it is money supply growth that counts, and that hasn't been dented one bit by the rate hikes so far. you must not forget, we are now a global village...borrowings can be sourced from Japan or Europe at far lower rates (and this is happening in spades) and what's more, the asset backed securities markets have become WS's own money machine....every time the Fed taps lightly on the brakes, the GSE's issue more of their paper, and the banks step up their lending for securities purchases and real estate...someone always hops into the breech. during the first quarter it was the WS houses' turn.
everything is thrown into the battle to keep the bubble afloat...and the Fed aids and abets, after all, what choice is there? we have seen what happens if money supply growth so much as slows to a 6% annualized rate (NAZ minus 40%).
so this will continue to the bitter end...the pyramid of leverage will grow even larger, until the natural saturation point is reached.
my conclusion is that after some backing and filling in the recent trading ranges (say 1250-1550 SPX), with a few scares thrown in to right the sentiment backdrop, the bubble will embark on the next leg of expansion...beginning from a cycle low this fall most likely.
regards,
hb
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