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To: yossarian67 who wrote (12830)	6/7/2005 2:26:57 PM
From: Carl Worth	Respond to of 13331

one thing to consider is the fact that even with our 10 year rates below 4%, we still have the most attractive 10 year bond in the world other developed countries' debt yields less, and there is no developed country safer to buy the debt of than the US, say what you want about deficits, etc. i'm not one to buy into "this time is different" very often, but in this case, there are reasons the yield is so low, and while i don't think the curve will invert anyway, the fact that it did wouldn't necessarily signal the same type of situation that it has in the past...the current spread on the curve is about 40 basis points, and it has been well below 100 basis points for months, yet banks and other financial companies continue to report net interest margins of 2 to 5%, so the curve clearly isn't hurting them much, as opposed to the effect flattening has had in the past...in reality, lower long term rates benefit most of the economy, allowing for more investment by businesses and individuals, so while NIM for some financials will compress if the yield curve flattens further, the bulk of the economy will probably do as well or better you have to consider factors such as china/india/japan/etc, the overall worldwide debt picture, arbitrage, hedge funds, the appetite for safe returns on large entities' money, etc., and look at how those factors are different from any time in the past, before you simply stand "amazed" that mr. greenspan, who clearly knows more about such things than you or i could ever know, would make such a statement...he is not one to make wild statements without reasoned reflection, so while we are all left to wonder about the exact reason for the "conundrum" of the current yield curve, i would say that it is a mistake to dismiss his comments so quickly as an aside, i think it's very unlikely that the fed will raise short term rates to try to affect long term rates...their job is to balance inflation and growth, without the latter causing the former to escalate...their stated purpose has nothing to do with moving long term rates, and one thing they clearly do is follow their charter, even if they err at times, such as in reaction to Y2K JMHO