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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (8954)2/29/2004 1:17:02 AM
From: CalculatedRisk  Read Replies (2) of 110194
 
ild, I think you are on the right track My main idea is that something has to cause a slowdown in Real Estate.

However, after the ECB cuts this week (assuming they will), I think the Fed may respond by intervening in intermediate term instruments (maybe the 5 year) and driving rates somewhat lower. A bond rally from here? Maybe. This would give RE one last gasp.

I was predicting this possibility for the last few months, and mish found this article by the Fed's economists:

Monetary Policy in Deflation: The Liquidity Trap in History and Practice
federalreserve.gov

This Fed article, from last December, describes the process: "One such approach is to implement additional monetary expansion by shifting the targeted interest rate to that on successively longer-term instruments, when additional monetary policy easing is warranted at near-zero interest rates."

More bubbles!
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