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The Bond Bubble


By HousingBoom   Follow   Mon, 28 Jan 2013, 3:18am PST   427 views   4 comments
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The Fed's bond buying program to lower interest rates has now caused a massive bubble in the bond market. 100% of economic bubbles burst so this event will definitely take place. When it does happen in 2013 or 2014, rates are going sky high!

Can home prices remain stable when rates are above 7.5%? Don't count on it!

http://money.cnn.com/2013/01/03/investing/bond-bubble-survey/index.html

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Bubbabear   Mon, 28 Jan 2013, 3:28am PST   Share   Quote   Permalink   Like   Dislike     Comment 1

The media is catching on to fed reserve members wanting to stop asset purchases, then he provided info telling cnbc that he expected the unemployment rate to drop to near 7 percent by the year end and that would then be appropriate for the fed to consider suspending its programs of asset purchases.

Basically fed members are continually talking about stopping asset purchases outside of that fed minute meeting. This looks like that the fed actually wants to do so rather than just scare people to their interests.

 It looks like they know they can't pull the market up if we get a recession since  Ben's QE 3 and 4 didn't increase the stock market. It grew off of gains in companies and ignored Bernanke. So I think some fed members want to start unwinding the fed reserve's balance sheet so they can tackle inflation with raising interest rates..... Basically these dissenting fed members want to preserve the ability to raise rates while the chairman seems to still want to press on.He may be hiding his true intentions and having some members voice what he really wants and be frames as guys who disagree. 

http://www.nytimes.com/2013/01/28/business/debate-shifts-at-fed-to-easing-its-efforts-to-spur-economy.html?_r=0

HousingBoom   Mon, 28 Jan 2013, 3:33am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 2

The Fed will not suspend their programs of asset purchases because they cant'! If they do decide to stop, then the over inflated economy will come down like a house of cards.

Also, they can't afford to raise rates because now our national debt is unsustainable with higher rates.

With our current situation, housing has an extremely low chance of recovering. Unless they can keep creating good jobs over the next 3-8 years, then housing has a chance.

With the bond bubble about to burst, home prices have no where to go but down.

raindoctor   Mon, 28 Jan 2013, 5:28am PST   Share   Quote   Permalink   Like   Dislike     Comment 3

"Like it's been in the case of Japan, low interest rates can go on much longer than expected, but right now it seems that all the stars are aligned for interest rates to rise," said Jeff Weniger, senior investment analyst at BMO Private Bank. "But ultimately, whether it happens in 2013, 2014 or 2015 doesn't matter too much. What matters is that you're not invested in bonds when they do rise."

If I were Weniger's boss, I would fire him right away. He does not know shit about bonds. The interest rate (or the price of money) is not determined by markets, but a policy driven. The rate is set by the Fed. Fed can't control the stock of money; however, they can control the short term rate. Markets can't do anything about it, as is the case with Japan.

A sovereign nation (a nation with its own currency) with a flexible exchange regime (unlike gold standard) can set its own price for the money (short term interest rate), since it is the issuer (creator) of its own currency. It has monopoly on its own money. Users of currency can't set that price: that's why all Euro zone members are facing problems, because they are *users* of Euro, but not issuers of Euro. Greece is like California,

BTW, that black swan guy Taleb lost money by betting against T notes. Stop listening to these guys, who don't have a sound understanding. These guys are like fortune tellers, who come up with an explanation for everything!!

C Boy   Wed, 30 Jan 2013, 12:46am PST   Share   Quote   Permalink   Like   Dislike     Comment 4

QE 3/4 did pump a lot of money into the stock market. It's at a 10 year high and the economy has still not revered from 2008.

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