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To: reaper who wrote (245895)	6/17/2003 9:36:38 AM
From: yard_man	Read Replies (1) \| Respond to of 436258

by jove, I think you've got it ... <g>

To: reaper who wrote (245895)	6/17/2003 10:39:13 AM
From: Perspective	Read Replies (1) \| Respond to of 436258

Does anyone have a link to Japanese bond yield data? I'm working on a theory based upon the near perfect correlation between our Fed funds rates, bonds rates, and the coincident stock market behavior, with timescale compression due to what our Fed "learned" from the Japanese experience.Economagic only seems to have a few years' Japanese data and I can't find it anywhere else. The compression is about 50%. What took the Japanese central bank two years our Fed accomplished in one. According to my read of our accelerated interest rate cycle, we are nearing the end of the seemnigly successful reflation effort. (Reap, you'll like this one. It places the US at about mid-1996 vs. Japan) BC

To: reaper who wrote (245895)	6/17/2003 5:16:33 PM
From: ild	Read Replies (2) \| Respond to of 436258

CC is getting rid of credit card business and the stock is up a lot. Why is this so bullish even though sales are down?

To: reaper who wrote (245895)	6/18/2003 11:59:43 AM
From: yard_man	Read Replies (1) \| Respond to of 436258

we're still getting a 2-handle, right finance.yahoo.com^TNX&d=c&t=5d&l=on&z=b&q=l some "wussies" are selling <g>

To: reaper who wrote (245895)	6/26/2003 11:28:18 AM
From: Perspective	Read Replies (1) \| Respond to of 436258

Cheap money means a bond bubble news.ft.com By Martin Barnes Published: June 23 2003 20:49 \| Last Updated: June 23 2003 20:49 In its increasingly desperate attempts to steer the US economy away from deflation, the Federal Reserve Board is blatantly encouraging increased leverage and speculation. Having almost exhausted the potential to cut short-term interest rates, the Fed's focus is now on flattening the yield curve by pushing down long-term rates. The Fed's strategy is to make an explicit commitment that short rates will be held down for an extended period, bolstered if necessary by purchases of long-term securities. This is extremely powerful stuff. Essentially, the Fed is telling the markets to have a party because the punch bowl will stay in place for a long time. Moreover, if the party starts to get too dull, the Fed will add another bottle of booze to the bowl. How long is a long time? The implication of recent Fed statements is that a rise in interest rates will not be contemplated before inflation rises. That is at least a year away. So the markets can be confident that short-term rates will stay at or below current levels for another 12 months or longer. That reality is now reflected in 12-month forward markets. Although long-term Treasury yields have already overshot on the down side, the Fed is implicitly encouraging investors to keep on playing the carry trade: buying and holding bonds in the expectation of rising prices. Treasuries are in a bubble but the Fed must keep it inflated, the reasoning runs. It is vital to keep mortgage rates down and housing strong until the economy is on a sound footing. The prospect of a year of extremely easy money is a gift to hedge funds and speculators. It is a signal to take on leverage and to purchase risky assets. Of course, this assumes that the Fed will be successful in keeping the economy out of a deflationary hole. But that seems a good bet. The overall policy environment in the US has never been more stimulative, with monetary and fiscal policy and the dollar all working in the same direction. The economy will probably be growing strongly by the end of the year. The Fed's aggressive efforts to steer the economy away from deflation will be conducive to mini-bubbles in a range of asset markets. The Fed does not necessarily want more bubbles to grow but they are seen as an acceptable price to pay. The Bank of Japan's fear of reinflating an asset bubble contributed to its policy error of easing too timidly in the early 1990s; the Fed is determined not to repeat that mistake. Of course, once the US economy is growing strongly, thoughts will turn to timing a reversal of Fed policy. Currently, the Fed wants to reassure the markets that there is scope for a significant rebound in the economy before interest rates will need to be raised. Nevertheless, the markets will know that it will be only a matter of time before stronger economic activity translates into a shift away from deflationary conditions. This is where the game of chicken comes in. The Fed is implying it is OK to buy long-term Treasuries at yields near 3 per cent and to engage in leveraged activities. But if the Fed is successful, it will not ultimately pay to hold bonds at these overly depressed yields and leveraged deals and investments based on persistent low rates may blow up. The Fed will face a huge challenge in managing its exit strategy from deflation-era interest rates if it wants to avoid turmoil in the markets. In early 1994, investors were caught off-guard when the Fed tightened after a long period of low interest rates, resulting in the worst bond bear market on record. The Fed learnt from that episode and now does a better job of telegraphing its intentions. However, even if the Fed tries hard to avoid surprising the market, the subtlest hint that the days of interest rates below 1 per cent are numbered will trigger a stampede for the bond market exit. Playing the Fed's game of chicken boils down to the "greater fool" theory of investing. You may know that it makes no sense to buy Treasuries at current yields but the game is worth playing if you can get out before the mass of investors. The fact that many investors undoubtedly take the same attitude sets the scene for dramatic marke reversals down the road. The Fed is right to take all possible steps to avoid deflation. If this means feeding speculation by promising to keep interest rates at negligible levels for a long period, so be it. But investors should make sure they have their eyes wide open when they play the Fed's game.