The Name is Bond - Part X
Its a real balancing act at the top, just ask the Flying Wallendas running our central banks.
Stable or deflating prices are the antithesis of central banking and the fiat currency-bond kiting-ponzi scheme.
Controlling flows and managing expectations are the agenda, not price stability and economic growth.
We have commented that in the near to mid term, all asset classes will be affected to varying degrees, while stagflation and debasement eats away cash positions.
The ultimate questions are how high will interest rates go, how much asset deflation will occur, and how much of a global slowdown will ensue?
Judging from the positions held by the players and the nature of the game, we can assume that the bond - currency scheme will be maintained at all costs.
There will be a blow off in the bond market where prices fall and yields rise even further at some point. That will be the time to buy those higher yield bonds and then sit on them as the Fed will later lower rates.
We have stated numerous times that 5.5% Fed funds is probably where the Fed stops and that interest rates as a market function could go far higher than most expect.
This may lead the Fed to pause and should there be a serious economic slowdown, drop rates again. This would again, severely debauch the dollar and lead to another round of money printing and low interest rate masked inflation.
As far as commodity plays in this kind of environment, witness gold, gold based and energy based stocks of late, not a pretty sight.
Should the dollar fall, gold will rise again. Oil has another $10 of head room to $82, then the economic effect throughout the supply chain would be much graver.
I feel that for the near term cycle, the energy and commodities plays have frothed, bubbled and peaked. Having their carry trades taken away, most of the leveraged players are unwinding as we speak.
Those commodity speculation positions will be recycled back into the bond market, large cap stocks and stock buybacks to support the status quo. But don't forget, those commodity plays will be revisited again.
Playing select equity issues that have bucked the bearish trend of late, especially anything paying a dividend, would be prudent.
Taking some forward looking risk by dabbling in the next frontiers of tech, biotech and nanotechnology at the low end of the cycle would also be well advised.
2008 will probably be a good year to pick up real estate on the down trend. Multiple rental units will be the least effected in the downturn as rents will firm up because people who cannot afford to buy or get foreclosed upon will need a place to live
Timing is everything and playing the sector rotation in equities, the asset and the bond market cycles, along with diversification and a very defensive mind set with tight stop loss orders will be in order.
Stable or deflating prices are the antithesis of central banking and the fiat currency-bond kiting-ponzi scheme.
Controlling flows and managing expectations are the agenda, not price stability and economic growth.
We have commented that in the near to mid term, all asset classes will be affected to varying degrees, while stagflation and debasement eats away cash positions.
The ultimate questions are how high will interest rates go, how much asset deflation will occur, and how much of a global slowdown will ensue?
Judging from the positions held by the players and the nature of the game, we can assume that the bond - currency scheme will be maintained at all costs.
There will be a blow off in the bond market where prices fall and yields rise even further at some point. That will be the time to buy those higher yield bonds and then sit on them as the Fed will later lower rates.
We have stated numerous times that 5.5% Fed funds is probably where the Fed stops and that interest rates as a market function could go far higher than most expect.
This may lead the Fed to pause and should there be a serious economic slowdown, drop rates again. This would again, severely debauch the dollar and lead to another round of money printing and low interest rate masked inflation.
As far as commodity plays in this kind of environment, witness gold, gold based and energy based stocks of late, not a pretty sight.
Should the dollar fall, gold will rise again. Oil has another $10 of head room to $82, then the economic effect throughout the supply chain would be much graver.
I feel that for the near term cycle, the energy and commodities plays have frothed, bubbled and peaked. Having their carry trades taken away, most of the leveraged players are unwinding as we speak.
Those commodity speculation positions will be recycled back into the bond market, large cap stocks and stock buybacks to support the status quo. But don't forget, those commodity plays will be revisited again.
Playing select equity issues that have bucked the bearish trend of late, especially anything paying a dividend, would be prudent.
Taking some forward looking risk by dabbling in the next frontiers of tech, biotech and nanotechnology at the low end of the cycle would also be well advised.
2008 will probably be a good year to pick up real estate on the down trend. Multiple rental units will be the least effected in the downturn as rents will firm up because people who cannot afford to buy or get foreclosed upon will need a place to live
Timing is everything and playing the sector rotation in equities, the asset and the bond market cycles, along with diversification and a very defensive mind set with tight stop loss orders will be in order.
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