|
PureBytes Links
Trading Reference Links
|
JW,
While the value to traders of this is debatable, it deserves comment.At one
time, I thought PEI produced some pretty fair analysis, but this one line in
Smith's piece is proof to the contrary:
"Many on Wall Street worry that Bush's trillion dollar tax cut would herald
a return to deficit financing."
Does anyone really believe that deficit spending ever ended? Does Smith
believe it has stopped??!! I wonder what he thought when the Grace
Commission concluded that if the income tax were abolished, it wouldn't in
the least affect the government's ability to provide services. The FRB
printing presses are all that's required to fund Congress' grandiose
schemes, since there's no legitimate backing for the currency - it's all
counterfeit money anyway!
The Smith quote only demonstrates the truth of another quote: "You can fool
all of the people some of the time, and some of the people all of the
time..."
I wonder if he actually believes that there's a surplus as well...
DC
----- Original Message -----
From: JW <inbox@xxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Tuesday, October 03, 2000 05:59 AM
Subject: [RT] FW (James Smith): The Debates and their effect on bonds
> James Smith's latest.
>
> Note: I do not have any association with his service. Go to
> http://www.pei-intl.com for any info desired.
>
> JW
>
> -----Original Message-----
> From: James Smith [mailto:JSmith@xxxxxxxxxxxxxxxxx]
> Sent: Monday, October 02, 2000 9:15 PM
> Subject: The Debates and their effect on bonds
>
>
> Politics has been known to play a role in the markets at times.
> Conventional Wisdom has it that Bush will NOT do well in Tuesday
> night's debates. But if he holds his own or actually beats Gore
> in the debates, it could very well send a chill thru the bond
> mkts. Ironically, Wall Street may be happier with a Gore win
> than a Bush win. Many on Wall Street worry that Bush's trillion
> dollar tax cut would herald a return to deficit financing. The Bond Mkt
> won't wait til Nov 7th to discount the worst fears. This could
> be one factor in explaining why the Sept High in Bonds is likely
> to hold. The other factor may be another spike in oil as Winter
> approaches. Can you imagine the effect on bonds if Bush wins
> the 1st debate at the same time oil begins a move to $40??
> Why do you suppose foreigners are selling their bonds?
>
> Europeans holding US bonds for the last year are sitting
> on huge foreign exchange profits, not to mention the capital
> gains due to the Treasury Dept Yield Curve Manipulation.
> Smart Money may be taking money off the table now, before
> the election. Afterall, there is no great need for the Treasury
> Department to continue buying in old bonds once the election
> is out of the way. The Treasury Dept focused their buy backs
> on the old bonds, which are closer in maturity to the 10 years, in a
> transparent attempt to lower the 10 year bond yield off which
> mortgages are priced.
>
> As you know, the housing market is a key sector of the
> economy. The administration could not afford to allow
> higher rates disrupt the housing market.....at least not
> until the election is over. What this means is that no matter
> who wins in November, bond yields are likely headed
> nowhere but higher.
>
> Bond market mavens will have noticed that the yield curve
> has been steepening of late. Typically bonds should
> rally as the economy slows down, but because the bonds
> have already seen such a tremendous rally, astute investors
> have come to realize that the risk outweighs the reward.
> With the 30 year bond yielding 5.95%, why risk a move
> to 7.00% or higher, for a potential rally to 5 1/2%--if that.
> It is extremely unlikely that bond yields will again move
> below 5.00%. It can't be ruled out completely, but the
> chances are slim, especially with oil already having started
> a longerterm bull market. But even if bonds were to rally strongly,
> we do not see this rally as "sustainable." Bonds can
> rally to tremendous levels, as they did in 1998 after the
> LongTerm Capital Ponzi scheme came undone, but note
> that such rallies are "short-term" in nature. If stocks
> were to go into an absolute freefall, no doubt Greenspan
> would cut rates aggressively, but it would take a real
> threat to the economy, not just the stock market, for
> the FED to get involved. The chaos so far in tech stocks
> does not qualify. Lowering rates before the election
> would be viewed by many as a political move.
> Remember, Greenspan still has over 3 years left to his term.
> He is very unlikely to do anything that will be remotely
> viewed as "politically motivated" in front of the election.
> He might try to talk the market up by standing on the
> Titanic and telling people there is nothing to worry
> about, but he is not going to rescue your sinking
> portfolio.
>
> It is entirely possible that both stocks and bonds go
> down together. Many investors have been and will
> continue to, run to cash. Cash is King when all others
> are reduced to paupers.
>
> Technicians will also note that bonds (expressed in yield
> terms) broke out above a 20 year downtrend line
> some time ago. After breaking out above the trendline,
> bond yields can move aggressively higher at most
> any moment. That moment may not be far off.
>
>
>
|