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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: abuelita who wrote (33357)	4/18/2008 7:33:46 PM
From: TobagoJack	Read Replies (3) \| Respond to of 217739

just in in-tray, in reverse chrono ordere quote Play #2: I really think that if inflation concerns were driving what we're currently witnessing the equities markets wouldn't be rallying like crazy and the USD would be spiraling downward. IMHO this is the 'eye of the hurricane' sucker's rally created by enormous excess CB liquidity coupled with risk-free yields harbored in the negative real return zone. As bad as the actual newsflow,expectations have been manipulated so low that stocks can rally here and the higher risk-taking environment benefits other crap assets like the USD. The tactical move out of risk-free assets is driving Tsy yields higher,not inflation expectations. This should all end by late May,and I will go on record with the contrarian call that the shit hits the fan in 2H '08. Higher inflation and ultimately higher inflation expectations,lagged effects of credit contraction dragging US into recession and globe into slowdown,higher unemployment and the Fed with an empty toolbox. I don't know if this warrants a crash scenario,but equities will be killed by the twin blades of inflation paradigm shift and depressed growth.It's baked in the cake,but for today let's party like it's 1999….. Player #1: The credit markets are waking up to the CPI and PPI numbers. I note that December Fed Funds Futures are only discounting a further 25 basis points in cuts this year. And as the chart shows, Dec. Eurodollar futures have backed up 125 basis points since mid-March to an implied 3% yield! Thoughts, implications? Stronger dollar? More trouble for housing? Future trouble for stocks? Looks like long bonds may have made their lows for the cycle as well, but the 2's10's curve has flattened by nearly 50 basis points from its high as well. unquote