Clown-Free Zone... sorry, no clowns allowed Message Board

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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: eddieww who wrote (46260)	12/12/2000 1:28:09 PM
From: Archie Meeties	Read Replies (1) of 436258

Why would anyone profer credit or shift into fixed rate bonds at the start of an inflation cycle? Inflation tends to perk up at the end of expansions, not at the beginning of slowing. We're past the former, and inflation, although still understated, is subsiding. A quick look at the JOC-ERCI numbers can confirm this. The idea that bonds should be avoided prior to an inflationary period is correct, but this is no more than saying bonds should be avoided if rates are expected to rise. The only case when slowing growth doesn't become disinflationary is when inflationary forces beyond the feds control are present (this excludes wage pressure, credit expansion, etc). There are two examples of this that come to mind; massive dollar selling b/c of some political event (war, etc.) and commodity shortages (most importantly, oil). With 600 million barrels to go in the SPR, as well as the European reserve, we're a ways away from a global crude shortage, even if Iraq suspends shipments (they won't for any amount of time).

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