Posted on 12/27/2005 10:47:43 AM PST by rhombus
Earth to Krugman this condition was crossed many months ago...
The Friggin Fed should have stopped raising short rates 6 months ago.
Yeah, right before it crashes. No way in the world the Dow will rise 35% in one year unless the dollar crashes or inflation runs rampant.
We disagree. End of story.
Yes, just as they did the last time they raised rates.
Barring another 9/11, things should be quite good in 2006. The concerns about short term interest rates being higher than long term rates is bogus, and ignores the rest of our financial picture. We had an inverted yield curve (and a somewhat similar good economic position) prior to the long bull run of the Reagan-Clinton years. Inflation is tame, I'm pretty happy about where the dollar is, stocks are undervalued and CEO's are under-forcasting their projections...which are still pretty good.
Why can't the RATS figure this out? It's all doom and gloom with these morons. Krugman will probably come out of the woodwork and yell 'WE ARE ALL GOING TO DIE!! ABANDON SHIP!!!' What rubbish.
In theory, inverted Yield Curves are a signal pure and simple to move from one asset class (stocks)to another (bonds-long term ones)
As per the Kiplinger letter: 'An inverted curve occurs when short-term rates are greater than long-term rates, and is characteristic of investors' positive expectations of the economy. If investors believe that inflation and long-term rates will drop in the future, they would be eager to invest in long-term bonds now or "lock in" high yields while rates are low. Inverted curves may occur as the Fed raises short-term interest rates, and are always followed by economic slowdown. In fact, analysts have viewed inverted yield curves before each of the last five recessions in the U.S.'
A more indepth analysis is offered by Cantor Fitzgerald that may shed some smart thinking and real life economic variables as opposed to the doom & gloom scenarios offered by the RATS:
http://money.cnn.com/2005/07/08/markets/bondcenter/inverted_yield/
That's what you get with a central bank setting prices. The Marxists would be proud.
The market will continue to go up and down, and do whatever its going to do. The key is not to try to predict, but rather to react without overeacting. If you are in the market for the long haul, then continue to dollar cost average into a well diversified porfolio consisting of no-load, low expense mutual funds while waiting for more favorable buying oppurtunities, which I would define as 1190 for the S & P 500 Index or around 9900 for the Dow. Also, do not buy gold as an investment for any reason, and stay away from real estate and REITS at current prices.
I agree with your assessment. I remember that the yield curve was inverted in 1998; GPD growth didn't slow until about 4 or 5 years after that.
I've found you can't discuss these issues with fanatics.
Is this surprising? OF COURSE short term rates are higher than long term rates right now. Long term rates are set by the market. Short term rates are set by the Fed. Greenspan has been raising short term rates for over a year trying to burst the housing market the way he did the stock market in 2000. It hasn't worked. The market is telling the Fed to stop raising interest rates! It isn't a harbinger of recesssion if the Fed will just listen to the market and get the hell out of its way.
Don't tell me. Tell Fred Sherman, Ben Stein and the other economic pundits.
I'm not sure if it ever has or not, but why on earth anyone would expect large percentage moves in thirty of the biggest most cumbersome companies in America in this environment is beyond me .
Krugman is a total economic idiot. He really has NO idea what he is talking about. Every prediction he makes is wrong and you are right, Krugman blames every imagined economic problem on Bush tax cuts.
Ending a post with "End of Story" is as good a predictor of a fanatic as gold is a bad inflation predictor.
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