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

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To: Paul Kern who wrote (75784)	12/17/2006 12:43:29 PM
From: Rarebird	Read Replies (1) of 110194

>>Guess the CPI wasn't very convincing.>> Bonds are at the beginning of a long and winding road toward higher interest rates. I took a 20% position in RRPIX last week, at the close of trading on December 11: Message 23091032 One of the reasons why I only possess a 20% position (and will add on bond market rallies), is that if the stock market sells off as I expect it to in the January-February time frame, some of the money which has gone into the stock market mania will come gushing out and go into bonds as a "safe haven". That will temporarily depress rates. I expect some very nice buying opportunities in interest rates during the first quarter of 2007 as the stock market sells off. I'm very bearish on the 30 year bond: Message 23088824 Despite the fact that most think the Fed is going to cut rates in 2007, there is not one shred of credible evidence which points toward that happening. Perhaps those who think that also believe the Fed wants to generate more inflation, not less. This is being contrarian to the max, since about all the Fed talks about is the problem of too much inflation in a strong economy. Which is, obviously, a problem the Fed itself admits creating by being too loose for too long. And, the current solid rate of growth of the M3 money supply, as reconstructed by Now and Futures, has almost reached the 11% per annum rate, several times the GDP growth rate and a solid sign of an expanding economy: nowandfutures.com What about the "Soft Landing?" Well, in case you didn't notice, the soft landing already happened and the economy is taking off again. So much for a housing bust causing a recession next year. The bond market made sure that was a non-starter by countermanding the Fed's rate increases with rate cuts on the interest rates upon which mortgages are based. The Fed was essentially pushing on a string trying to rein in an overheated housing market and a too-high inflation rate.

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