James:
Actually, if you were to go back over my posts of the last few years, you would note that my bearish stance on the tech sector is not a recent thing. (I've been advocating shorting the sector for years based on fundamentals, hence the nickname). (g)
Like you, I track the Fed's activities and also monitor the bond pits (globally) and in past posts I have castigated Greenspan for his sleight-of-hand (the nonsensical business of taking a "tough stand" (raising rates) while at the same time actually flooding the system with liquidity via repos, coupon passes, direct purchasing of treasuries, etc.). We sing from the same hymn book and sit in the same pulpit on that scenario.
Where we differ is in our interpretation of current bond rates and trends. I put more faith in what the spread and swap rates are telling us than in the the actual rates. Neither bespeak bond pit happiness or confidence.
I don't disagree with your point of view that the long end currently reflects an expectation of an small rate cut, but as I noted earlier, Greenspan may not have the room. We shall see. Even if he does, a quarter point will provide about as much impact on this imploding stock market as would my spitting into Lake Ontario have impact on its high water mark. I know of not one single bond trader (and I know a few of them) who thinks that Greenspan can cut rates much without causing a major treasury sell-off globally,...... and he isn't going to do this, especially with the Euro becoming an accepted reserve currency. That two percentage point interest rate differential is probably the minimum that the rest of the world will accept to retain possession of all that wallpaper.
With respect to bear-inspired blow-offs, no disagreement here, but to me, the blow-off is well behind us (A/D peaked in April 1998 and shows little sign of wanting to reverse its slide).
Sure, I will be cautious tomorrow and again on Tuesday (although I am glad my clients entered this weekend loaded with optical short/put positions) as a result of "Fed Tuesday", but there are too many nasty thing coming unglued in the global economy (including imploding corporate bond prices) to make me renounce my Vaderian ways just yet. (g)
Keep the posts coming in Jim, as they are always of value.
Best, Earlie |
