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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: TobagoJack who wrote (50635)5/29/2004 4:55:28 AM
From: Seeker of Truth  Read Replies (3) of 74559
 
Let's say some big country with their own currency announces that inflation has increased. Bonds of that country decrease in value as they should, which increases their yield, just compensating for the increased inflation. The real return of those bonds remains the same. Is that any signal to rush in and buy the currency? Well if it's the US, apparently it is. So increased inflation is a bullish sign for the currency. And decreased inflation is bearish. The most recent report says that US inflation is unexpectedly puny. Buy the US $? Hell,no, sell it! How come nobody was interested in owning the Brazilian real when inflation there was in triple digits? According to the crazy logic applied to the US dollar, it should have been popular.
The only conclusion from this is the astonishing one, that most of the market participants simply don't think in terms of real return. !!!!!!
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