Friday, Mar 26, 2010
Interest Rates heading up, ready or not
Associated Press via Yahoo: Interest rates surge after weaker Treasury auction
"Interest rates surged in the bond market Wednesday after a government debt auction drew only tepid demand for a second day."
QE can't go on forever. This is what Richard Russell of Dow Theory Letters has been explaining - "I've been talking about the bonds for months on end. What I said was that "the Fed can continue to follow its quantitative easing (printing money) program until the bond market says it can't." Guess what? The bond market is now very close to saying, "We've had enough."
Posted by mountain goat @ 02:04 PM (736 views) Add Comment
1 Comment
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1. mountain goat said...
Continuing on what Richard Russell writes
".... You may remember that I emphasized that the bond market, in size, dwarfs the equities market. If the bond market (the debt market) heads down and interest rates head north, it would signal that the "fun's over."
... Many older subscribers probably remember my lifelong emphasis on the POWER of COMPOUNDING. But what of the power of negative compounding on debt? I think we are about to find out.
The power of negative compounding will be brutal. The cost of carrying the world's debt (including the US national debt) will be devastating. It will be highly deflationary and it will crush everything in its path. There will be a frenzy for dollars -- dollars will be needed to carry or pay off debt. There will be initial pressure on gold. There will be pressure on stocks. "Safe" high quality high-yielding bonds will compete with all other investment sectors."
http://www.thedailycrux.com/content/4404/Richard_Russell
He had this to say on 22 Feb on this subject "The One Chart That Scares Richard Russell " which was covered on many blogs for example:
http://pragcap.com/the-one-chart-that-scares-richard-russell