OT: <<I don't think ANYONE is really holding out for the next rate cut>>
Gold bugs should be, here's why: as we lower short term rates, the spread between them and Gold lease rates diminishes, then disappears, then inverts (ie, the yield from leasing, then selling gold and parking the money in T-Bills goes negative). Therefore the gold carry trade disappears and a huge source of gold "supply" goes away (with the expected result on the price of gold). Note that this will occur WHETHER OR NOT there is inflation; its purely a market price phenomenon.
The other group that should be eagerly awaiting another rate cut are bond shorts. The bond vigilantes have awakened and "snapped to the play" as the card counters in Vegas might say...yields on the 10- and 30-year bond (and mortgage rates) have backed up since EVERY rate cut this year:
stockcharts.com[l,a]daclyymy[pb50!b200!d20,2][vc60][iUb14!La12,26,9!Lg]
Also note that since the first rate cut, (some 250 Fed funds BP's ago), the 10 yr yield (which most fixed mortgages are based on) has moved UP from 487 BP's to 540 BP's now. This means there is no (further) advantage to be gained by mortgage refinancing for the ever-stretched consumer (which was a big so-called benefit of the rate cuts in the first place). Any further cuts will be met with higher long term rates...freezing out the refi's at long last. |
