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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: ChanceIs who wrote (128132)	1/31/2010 1:32:49 PM
From: Bearcatbob	1 Recommendation Read Replies (1) \| Respond to of 206118

Thanks. I have a friend who tracks interest rates religiously. I will see where he gets his info. It looks like everything about is return OF principal instead of return ON principal. Bob

To: ChanceIs who wrote (128132)	1/31/2010 4:57:56 PM
From: Keith Feral	2 Recommendations Respond to of 206118

There is unbelievable demand for Treasury notes and bills, since money market funds are pegged near zero. Ultra high libor spreads and record CDS rates foretold the disaster in the fall of 2008, not FED funds going to zero. That took all of the pressure out of the system. I think alot of banks will breathe much easier with interest rates back near 1% next year, once the FED moves away from zero. FNM is forecasting 1% FED funds for 2011, and 4.5% 10 year Treasury spreads. That means there will be a 100 bp parallel shift in rates for next year, which will enable banks to expand their net interest income. The ironic thing about low interest rates is that it becomes very deflationary. Asset mgrs aren't making any income off money market funds or short term government bond funds. There really isn't any interpretation necessary to analyze a zero rate of return on cash right now. I think rates will maintain extremely low rates for much longer than the market believes, which is forcing people to put their cash deposits with CD's at the banks, government bonds, corporate bonds, and other instruments. I don't think the US can afford to be paying out more than 1% interest rates over the next several years with the amount of public debt the government has racked up the past couple of years. All they have to do is let the market work on it's own. Europe has even further to go than the US when it comes to low interest rates, since they have only entered the first year of their economic contraction. Interest rates have always been a luxury good for investors to get paid alot of money for no risk. Hard to believe that FED funds were over 5% in 2007. People would kill for that kind of free return today. But, it certainly served the purpose of delevering the entire US economy and bringing inflation to it's knees. But the social cost in terms of lost jobs was unimaginable. Someone was saying that the economy would have to post at least 4 months of 200K job creation before the FED can boost rates. No doubt that job creation is going to be more robust than the lousy estimates from last year, based on the stimulus from cheap housing, lower household debt, lower inventories, and 10 years of no growth.