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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (7287)	1/5/2006 9:54:40 PM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 33421

Which would move more is what I am curious about. For the yield to uninvert rates on the short term should drop as recession hits yet long rates should hold better due to expectations that the Fed will be lowering rates and reinflating eventually thus raising longer term inflation risk. At least this is how my mind wraps around this. However, from past recessions I know the long bond moves more but have no idea why. Compounding effects of the rate differentials? The reason I want to compare moves among the two is I was thinking it would be better to short one end of the curve while going long the other yet the two sides of my brain aren't talking to each other or something. Anyone know how the 2000 to 2003 was best played? I can see on my own charts that the spread widened yet recall hearing about how long bonds were the best play as far as bang for the buck was concerned. =================== I guess the boring way to play it would be to be long the 10 and/or 30 year and then as rates drop, sell the gains. My problem with playing this straight up like I would while Greenspan was still hanging on is we know nothing about Bernanke and how he will act. He seems to be a loose money advocate from his writings about the Depression yet since the street seems to expect him to open the flood gates, he is talking lately like he may be hawkish. Who wants to hold long term debt when you have no idea if 3 years from now we will be at 1% interest rates or 18% like in the Volker era? Right now I am extreme short term duration as I want to see Bernanke and how he handles things for a while. ============== While soliciting for inputs from people, I would be interested in knowing how much margin some of you traders use for Bonds. You go cash only full price or leveraged to the hilt? ANyone buy through Treasury direct and then just sell through them for the flat fee or else transfer them to a broker and then sell? Good Luck, Lee

To: robert b furman who wrote (7287)	1/11/2006 1:24:11 PM
From: Chip McVickar	Read Replies (1) \| Respond to of 33421

Hi Bob, The inversion is an important event.. even if the chorus from Wall Street and its 'talking heads' are leading us to believe... "this time it will be different, " because interest rates are low. IMO... the inversion is a clear indication of imbalance, and if it remains inverted for any substantive period the chance of a economic slow down is increased. It could be a combination of so much cash sloshing around all over the world looking for a safe home that the fed doesn't need high rates to bring in money.. and/or that all that money seeking a home just has to put up with the fact that return on bond investments will just plain remain low...!!! That overall economic returns are expected to remain low. Last year S&P stocks returned 4.9% Average rate on a 6 month CD in December was 4.6% Are these ramifications for general economic prospects...? In any case... as the stock markets begin to receive more money in this next bull move out of this last flat correction we should see serious higher numbers in the world wide indexes. At least until the perception changes. <smile> Here's to 13,000 on the DOW. My Best, Chip