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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (67779)	8/9/2006 11:22:23 AM
From: John Vosilla	Respond to of 110194

'Cutting short rates in a rising inflation and weak dollar environment will be the key to send long rates higher. At that point you have a bad situation that could take a few years to play out -- perhaps five years or more, and possibly much, much more (like ten or twenty years).' Bingo. But how long can they continue to monetize the long end worldwide without ramifications? So timing for junior gold miners to take off will be in anticipation of rate cuts? Is that how it played out in the 1973-80 period?

To: GST who wrote (67779)	8/9/2006 2:21:57 PM
From: SouthFloridaGuy	Read Replies (3) \| Respond to of 110194

The Fed is not stupid. They would not cut rates into higher oil prices, especially since a lot of the move in oil is liquidity driven. What motivation would the Fed have to cut rates with inflation expectations running above target? The US requires foreign capital, thus rates HAVE to be higher here than anywhere else until demand slows enough to rectify the current account balance. The Fed will do its best to perform a fine balancing act, by devaluing the dollar and letting inflation run a little (not a lot) higher than target, but in the end a sharp recession(s) is imminent. There has never been a time where the Fed has cut rates INTO inflation. When they cut rates in 1975, they had already catalyzed a lot of pain by inverting the yield curve several hundred basis points, catalyzing a recession and consequently the cheapest market since the Depression. Inflation reared its ugly head again, but not because the Fed was purposefully trying to create it. I think you are mixing up being behind the curve versus going against it.