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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Wyätt Gwyön who wrote (4775)	1/11/2004 1:46:46 PM
From: mishedlo	Read Replies (1) of 110194

don't you think the apparent consensus that the Fed can't or won't raise interest rates (except perhaps once, nominally in the "second half") until "after the election" is just too entrenched in the market? Not me Remember the Curve 1) The FED will be FORCED to act soon 2) The FED will act by the middle of the year 3) The FED will not act until the election 4) The FED will agressively hike after the election People were SERIOUSLY wrong here on #1 A TOTALLY blown call. When people were preaching #1 here I was preaching 3. In view of JOBs data #2 just got blown out of the water (by the futures) but of course it remains to be seen if it holds true. There is still an implied 1/4 hike for Sept. I think it is wrong. That remains to be seen. There are still plenty of pundits that think a hike is imminent or that the "market will force the FED's hand". I love it. I want lots of people shorting Eurodollars. When they cover my short puts will go up. The plain fact of the matter is that Eurodollar futures still imply considerable hikes. Let's take a look SEP 04 EDU04 98.4750 - 1/4 point DEC 04 EDZ04 98.1150 - 1/3 point MAR 05 EDH05 97.7050 - 2/5 point JUN 05 EDM05 97.2950 - 2/5 point SEP 05 EDU05 96.9400 - 1/3 point Is that complacency or insanity? I say it is the latter All that has really happened is that the curve was postponed. I still maintain that pricing in rate cuts of more than 1/4 point each and every quarter is just plain nuts. Russ can believe what he wants and I will belive what I want, but the picture presented that everyone is betting one way is WRONG. There has been a shift and we will see that shift keep getting postoned, quarter after quarter after quarter. If there is a retrace of this last huge move the Eurodollar bears will start hooting until they get blown out of the water yet again. The intent of the FED is clear, hikes will be based on jobs, and the market still does not believe it. Quite amazing really. This economy simply can not take rate hikes of a full 2 points over the next year and a half. We would crash so frigging hard on those hikes and quite literally you have to be an idiot to not see that. OK, so we get a hike or two.... Are we gonna get 6 consecutive hikes? Get real. Mark my word. The next big thing will be Euroland LOWERING interest rates not the US raising. Mish

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