Comments on: TIM BOND: EQUITY INVESTORS ARE DANCING ON THE EDGE OF THE VOLCANO http://pragcap.com/tim-bond-equity-investors-are-dancing-on-the-edge-of-the-volcano Sat, 26 May 2012 09:29:57 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Sam Deprist http://pragcap.com/tim-bond-equity-investors-are-dancing-on-the-edge-of-the-volcano/comment-page-1#comment-11683 Sam Deprist Thu, 11 Feb 2010 03:31:25 +0000 http://pragcap.com/?p=16729#comment-11683 Re: "Bond found that a 1% change in deficit/GDP caused a 32 bps increase in 10 year rates." We all observe the opposite in the last 2 years, that is the deficit jumped up and the rates are generally lower. Since the credit crisis continues, the deficit/GDP ratio should not work until complete recovery comes. We observe huge money creation by the Fed (QE, etc) without any hint of inflation. Did I miss anything? Re: “Bond found that a 1% change in deficit/GDP caused a 32 bps increase in 10 year rates.”
We all observe the opposite in the last 2 years, that is the deficit jumped up and the rates are generally lower. Since the credit crisis continues, the deficit/GDP ratio should not work until complete recovery comes. We observe huge money creation by the Fed (QE, etc) without any hint of inflation. Did I miss anything?

]]> By: van http://pragcap.com/tim-bond-equity-investors-are-dancing-on-the-edge-of-the-volcano/comment-page-1#comment-11673 van Wed, 10 Feb 2010 15:42:32 +0000 http://pragcap.com/?p=16729#comment-11673 thanks TPC, don't know if you noticed this article by one of your fellow contibutors to SA: http://seekingalpha.com/instablog/456511-john-furlan/47513-ecri-s-first-negative-tone-change-in-past-year-is-significant thanks TPC, don’t know if you noticed this article by one of your fellow contibutors to SA:

http://seekingalpha.com/instablog/456511-john-furlan/47513-ecri-s-first-negative-tone-change-in-past-year-is-significant

]]> By: Rob http://pragcap.com/tim-bond-equity-investors-are-dancing-on-the-edge-of-the-volcano/comment-page-1#comment-11666 Rob Wed, 10 Feb 2010 12:56:32 +0000 http://pragcap.com/?p=16729#comment-11666 Additionally, low inflation and rising rate pressure favor equities. Bond prices will most likely see downward pressure (oversupply, increasing default risk) even as inflation remains low in most developed countries. Short-term rates will remain in the free-zone for years to support a dead housing market and a very weak economy. Savers will continue to be starved for yield which will keep bond prices from jumping as much as many fear, but that will also keep equity investors from switching to bonds. (Maybe at some point there will be a run for the exists in all but the shortest term bonds as the tide turns and bond rates rise, but is likely a few years away.) Nevertheless, the mid to long-term risk-reward relationship with bonds looks terrible. Equity and bond markets will probably become increasingly volitle within a wide trading range that will last for years. The market seems to be right about in the middle of the trading range right now. (SPX 900-1200 or 800-1300 or 750-1350?) Additionally, low inflation and rising rate pressure favor equities. Bond prices will most likely see downward pressure (oversupply, increasing default risk) even as inflation remains low in most developed countries. Short-term rates will remain in the free-zone for years to support a dead housing market and a very weak economy. Savers will continue to be starved for yield which will keep bond prices from jumping as much as many fear, but that will also keep equity investors from switching to bonds. (Maybe at some point there will be a run for the exists in all but the shortest term bonds as the tide turns and bond rates rise, but is likely a few years away.) Nevertheless, the mid to long-term risk-reward relationship with bonds looks terrible. Equity and bond markets will probably become increasingly volitle within a wide trading range that will last for years. The market seems to be right about in the middle of the trading range right now. (SPX 900-1200 or 800-1300 or 750-1350?)

]]> By: buckstar http://pragcap.com/tim-bond-equity-investors-are-dancing-on-the-edge-of-the-volcano/comment-page-1#comment-11663 buckstar Wed, 10 Feb 2010 08:57:41 +0000 http://pragcap.com/?p=16729#comment-11663 What prevents the Fed from continuing to increase its balance sheet to keep rates low? The Fed seems able to buy treasuries/MBS at will..... what/who can stop QE? Imagine if long rates went to historical trends, while even at now record low rates countries/consumers are barely keeping it together (if that).... Imagine housing if mortgages went to 8%. It seems the likely future is lots of coordinated printing/QE from most countries...... What prevents the Fed from continuing to increase its balance sheet to keep rates low? The Fed seems able to buy treasuries/MBS at will….. what/who can stop QE? Imagine if long rates went to historical trends, while even at now record low rates countries/consumers are barely keeping it together (if that)…. Imagine housing if mortgages went to 8%.

It seems the likely future is lots of coordinated printing/QE from most countries……

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