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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (3669)12/20/2003 1:27:23 PM
From: Real Man  Read Replies (1) of 110194
 
Yeah, it makes sense.

I think in the short run, things are most influenced
by derivatives, since this market has outgrown all other
markets. That's why past relationships between different
markets (such as dollar and interest rates) don't seem
to be working. At least, not yet. In particular, stocks
and bonds so far failed to move down as the dollar declined
some 30% from the peak. My take on this is that the main
derivative market in interest rates is highly manipulated,
and so far is holding, as banks pile up more and more into
long-term bonds, borrowing short term. They short the
dollar to hedge their bets. Some of this liquidity spills
over to the stock market.

We'll see how it goes, but my bet is when bonds finally
break, the normal relationships will be restored in
a violent manner. That would mean much higher long-term
interest rates, and much lower stock prices.
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