30 year Treasury @ 3.90%

[SK in CV]

[quote=The-Shoveler]
Los Angeles barely escaped last year, I don’t think they have long.

[/quote]

“Some people said” they were on the verge of bankruptcy. It didn’t happen. LA isn’t closer to BK now, they’re much further away. And with rising RE prices, revenues will increase, and they’ll get further away.

Are they still at risk? Sure. I just don’t see a scenario that will cause another RE crash. “If” interest rates rise dramatically? How’s that going to happen? The Fed continues to control. As they have for decades.

[The-Shoveler]

Tell that to Garcetti …

Anyway this is going nowhere so I give up.

[SD Realtor]

I agree with SK.

I think the misconception is that people throw around the term “fed raising interest rates” in a haphazard manner. This is a typical knee jerk reaction however the 10 year yield has been slowly on the rise for the past several weeks.

Look at what Bill Gross said… pretty much the identical text that SK wrote above which I do agree with. The market movement was not only about the fed speech, it also had something to do with the slowdown in China.

All things being equal though, I would not have wanted to be a homebuyer floating a mortgage rate as you would have been slaughtered in the past 2 days. Bottom line is I don’t see the yield spiking…we are nowhere near that point and I don’t see the bond market bubble popping yet. It still has a few years left before it ruptures and when it does it will be ugly.

As for inflation, most of us have been suffering through higher prices for many commodities including food and water for the past several years. Don’t forget fuel and energy costs.

The only thing we have not had is wage inflation. I also believe the underemployment numbers and those that have simply dropped out of the workforce are fairly staggering. Similarly we have record numbers of citizens on welfare, food stamps, and disability.

[The-Shoveler]

Why I said, I don’t think we will see the fed exit any time soon.

If they do they will be forced to reverse course very quickly IMO.

[skerzz]

The move in the 10 year over the past several weeks has actually been pretty dramatic. The yield has increased roughly 80 BPs (or approximately 49%) since early May.

[SK in CV]

[quote=The-Shoveler]Why I said, I don’t think we will see the fed exit any time soon.

If they do they will be forced to reverse course very quickly IMO.[/quote]

That’s the thing that I really don’t understand about what’s happened in the market. They didn’t change course. Bernanke said the same thing he’s been saying for a year at least. Basically he’ll keep feeding the junkie until the methadone kicks in. It’s not the first time it’s happened, but I think this might be the biggest move after an FOMC meeting. As far as maintaining market stability, he’s really between a rock and a hard place. He farts and the market panics. He doesn’t fart, the market panics.

[livinincali]

[quote=SK in CV]
That’s the thing that I really don’t understand about what’s happened in the market. They didn’t change course. Bernanke said the same thing he’s been saying for a year at least. Basically he’ll keep feeding the junkie until the methadone kicks in. It’s not the first time it’s happened, but I think this might be the biggest move after an FOMC meeting. As far as maintaining market stability, he’s really between a rock and a hard place. He farts and the market panics. He doesn’t fart, the market panics.[/quote]

I think the market is starting to figure out that the fed really isn’t in control as much as they’ve thought. For awhile people have been thinking that the fed is an insurance policy for being long. I think people are starting to open their eyes and see that economic conditions across the globe are deteriorating and that faith in the fed might not be able to save them.

I kind of expect faith in the fed to be similar to subprime is contained during the last bubble pop.

[flyer]

Since I believe we are in uncharted territory, I don’t think anyone really knows exactly where this train in going. Along with real estate and some other investments, we’ve been hoarding cash for years, so it will be interesting to see how all of this plays out for better or for worse.

[SD Realtor]

I agree that the move since May had substance although I don’t think it was a surprise. The market usually leads in pretty much most economic trends. Gross from Pimco had spoke about bonds a few months back. You look at gold for instance at 1300. However many funds were selling gold back in February. While there was no landmark statement by Ben, everyone knew one of a few things would happen in a few years, either QE will scale back and the fed will slow or stop purchasing at auctions because the economy will improve, or the much worse alternative. Either way, the fed cannot keep monetizing the debt for another several years, it has to start scaling back. The market has been looking forward IMO but today was a knee jerk to China, not so much Ben. Also if you look at the past it looked like the market was definitely wobbling. It just needed an excuse to dump. Sell in May and go away was just a month late.

[SK in CV]

China makes a lot more sense, except for the precise timing. It started while Bernanke was speaking.

July earnings could be interesting. If they surprise to the downside across the board, the Fed is really in trouble. Though I’ve seen no trend in warnings that would make that likely. Employment doesn’t reflect that either. It just looks like slow as a snail sluggish growth. If earnings get confirmed, I’d be surprised if this 5% adjustment doesn’t disappear over the course of the summer.

[SD Realtor]

It could happen. I follow Gross at Pimco alot… back earlier in the spring said he seemed to signal a pullback in bonds… then as recently as last week he was saying they were buying again. As I said earlier he was saying what you were echoing as well which makes sense. Other bond guys are saying that while the bond bull run is not over, it is closer to the end rather then the beginning… but that is still measured in years not months. The data does seem to be on your side with respect to all of the numbers. I bought TBX not long ago but may take my money and run as I agree I think the tnx will pull back and settle out. Not sure if it is gonna run all the way back down to where it was at though. I guess we’ll see.

[SK in CV]

Pretty nice call on the tbx. Similarly, my girlfriend got into tnx the middle of April. She’s traveling today, I suspect she’ll dump it tomorrow morning.

I like the guys at Pimco. Gross is good. But I particularly like El-Erian. He doesn’t pull any punches. He had a column about a week ago basically saying the Fed has done everything it can with monetary policy, and laid the responsibility of the potential for high unemployment becoming structural at the feet of congress and their lack of fiscal policy action. Maybe I like him because I often agree with him.

[XBoxBoy]

[quote=livinincali]I think the market is starting to figure out that the fed really isn’t in control as much as they’ve thought. For awhile people have been thinking that the fed is an insurance policy for being long. I think people are starting to open their eyes and see that economic conditions across the globe are deteriorating and that faith in the fed might not be able to save them.[/quote]

Allow me to propose a different narrative. The market doesn’t have a clue. At the margins it’s traders who only worry about will the market go up in the next few minutes or will it go down. Lots of nervous traders who felt that this fed meeting was gonna be a big deal. No one seemed to know which way it would be a big deal, but it was gonna be a big deal. Once the momentum started swinging one direction it just kept right on going. This last two days of market moves have nothing to do at all with what the fed actually said. It has nothing to do with where the economy will go x years in the future. It has everything to do with traders who will bail or buy in an instant depending on how they feel momentum is going. Not on fundamentals or economic realities.

[moneymaker]

I hope you’re right XBoxBoy. I bought some Apple today thinking the market might bounce/or they would finally release something/or they would actually buy back some stock like they said they would/ or the Chinese school kids would consider Apple stuff a status thing and their parents would indulge them, I could keep going but let’s just say I bought on a hunch.

[paramount]

Isn’t Detroit now essentially bankrupt?

[Author]

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