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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (54682)2/25/2006 4:04:11 PM
From: Wyätt Gwyön  Read Replies (3) of 110194
 
if the SR is now estimated at 4, we should not expect the Fed to ease back in policymaking in the near term. That means rates are headed higher and for longer than many expect.


you can say that again. Jim Grant, whose readership must include 4000 of the 8000 hedge fund manglers out there, is on the record saying the Fed is "done". Fred Hickey in his latest letter says he believes in Grant's "gut". i disagree. wouldn't it be the surprise of the year if Bernanke turns out to have real balls and raises to 7%, which would be a fairly balanced rate? that would spell death to the world economy as we know it and create some great buying opps.

all of the reasons people give for the Fed to stop have to do with the domestic credit bubble and the weak and vulnerable domestic consumer. but perhaps Bernanke is also concerned about outside forces, like how the hell can the Fed be easing when Japan starts raising? and how the hell can Japan not raise from 0 when their economy is growing at 5.5%?

of course, 7% may be too extreme for Chopper Ben, but consider that a couple years ago, Mish and other bond bulls didn't think 2% would happen. he could easily do five, that's practically in the bag. what if he goes to 6%? i just don't think a lot of the positioning in terms of gold speculation, heavy foreign currency and international equity fund buying, manic buying of all and sundry junk from emerging markets after their outperformance streak is getting long in the tooth--really your entire Risklove Industrial Complex--is at all ready for a US Fed at 6%. i don't know that it would happen, but it's a very interesting potential train wreck for all risklove trades.
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