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Non-Tech : The Woodshed -- Ignore unavailable to you. Want to Upgrade?

To: jrhana who wrote (16303)	11/8/2004 8:14:44 PM
From: nspolar	Read Replies (1) \| Respond to of 60927

jr, technically I've been a proponent of a TYX/TNX bottom in this area, for some time, and said so. But longer term I don't think rates are going to rise as much or fast as some may presently indicate. Maybe a lot of volatility and net up. Here is why: "Rates are still at historic lows, of course, They are moving up, but how fast and how far is anyone's guess, because there are a number of constraints on how fast and how far the Fed can afford to raise them. These constraints have been discussed in the past, but here are the highlights: If short term rates move up too fast, they will crimp and then cripple consumer spending, and thereby the economy at large. If they move up too slowly, the dollar will fall further than even the Bush camp would like it. Good for gold, good for the Dow (at first), but bad for the economy since most raw materials will be come too expensive, leading to higher prices AND a need to raise rates - which gets us back to the first sentence in this paragraph. If long term rates move up too fast, they will form a steep, jagged cliff against which the waves of market action will smash the US "homeowner-ship." If they move up too slowly (as in when the Fed uses its "unconventional" arsenal of tools and buys long-term treasuries outright to force rates down), then the rapidly added liquidity will drive US prices up. The Fed's buying of long term debt will be counteracted by the currently begun wave of foreign disinvestment of US debt (which puts upward pressure on yields), forcing the Fed to buy treasury bonds at an even faster clip than it wants to. The result: a tidal wave of dollars from both at home and abroad, driving consumer prices even higher, crimping disposable income - and therefore economic growth. But long before the disposable income squeeze shows up in the economic figures, it will show up elsewhere ..." The Fed is boxed in. gold-eagle.com