Wednesday, October 3, 2007

The Double Failure of the So-Called Fed Model

Lower Interest Rates = Lower Stock Market

A technical article (based on K-theory) that says since 1997 the correlation between IRs and stocks has reversed. Fallings IRs now result in falling stocks (since 1997).

The outlook is for 10-year T-bond yields to go below 3%, if not below 2%, and the stock market's P/E ratio to continue its seven year decline to below 10.

If lower IRs cannot hold stocks up, they wont hold property up either.

Posted by sold 2 rent 1 @ 01:59 PM (609 views)
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5 thoughts on “The Double Failure of the So-Called Fed Model

  • Why bother with a post like this?

    How many readers have a degree in economics?

    When the crash comes we can read about it it the daily rag. Why waste your Time?

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  • Interesting article. The Fed’s room to cut is now severely limited, IRs being historically very low already (notice how Bernank’s rhetoric following the recent cut was not particularly sympathetic to further cuts – he knows they will not work). Basically, Greenspan’s great give-away was the last. The Fed can now only deliver depression. This, as far as I can make out, is indicative of the end of the so-called K-cycle, and we are fast approaching it.

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  • Commodity prices will rise in relation to the lower dollar. This will push up the cost of (say) car batteries.

    Lead hit an all-time high today, Zinc & Copper also rose steadily.

    Expect to see Oil at $85 dollars soon. This does not mean oil and commodities are rising against other currencies in the same way. The $ is hitting lows against the Euro.

    The £ dropped again on speculation the BoE Rate will drop in October or November.

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  • planning4acrash says:

    When will we see this translate into booming inflation for the US? When will they decide to support their currency? Or are they only interested in re-balancing their trade deficit and reducing their debt obligations?

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  • Wadisgod,

    Did the graphs scare you?

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