One thing you rarely see in markets is thinking against the current. Aside from Taleb and aber, basically it's toe the line journalism. To me one thing is abundantly clear. The day QE ends, the world as we know it will end.
The markets are FLOODED with money. Today,s relatively benign and directionless jobs number, in any other market, would be a non event. But with the massive liquidity in the system this will cause eruptions. The world is ticking closer and closer to world war.
IMO, the 10 year treasury has about 30% upside. Why? Simple. The normal spread between CCC rated bonds (which are bonds EXPECTED to default) and treasuries is about 20%. Today, it's 8.5%. There is quite literally NO MONEY to be made in mortgages. The yield on AA rated corporates is 2.59%. This rate, assuming there will never be a default is pretty close to the real inflation rate. But in a bond FUND, fund expenses are going to eat up about 30% of the yield. Conservattively managed funds are getting bludgeoned. American funds BFA, according to Reuters, is suffering massive outflows as people go go Billy Bob's high yield.
One thing you rarely see in markets is thinking against the current.
I think we see that kind of thinking all the time. How many disparaging comments about Abercrombie have I read on this board? Contrarian thinking is very common. What you don't see is contrarian thinking prevailing much. If it did, it wouldn't be contrarian.
If markets are flooded with money, why don't we have inflation?
The big story today SHOULD have been that JPM was caught gaming the energy markets and there should be criminal indictments. The story we ACTUALLY saw was jobs "beat" by 40,000. Today's jpobs number is probably bogus.
The story clould have that Bernanke's stimulus is creating vast pools of wealth for the ultra contributor... I mean wealthy... and is impoverishing the poor.
But as I said 12 trillion times, when you have no wage growth and no job growth, inflation can only manifest if collaping product quality and dropping demand, which can be seen in the fact that gasoline sales are dropping, retail sales are falling, imports last month had the single biggest one month collapse since Lehman. we are about to cross thr 50,000,000 threshhold for food stamps and Walmart is reporting more shoppers coming in at 12:10AM after there befeit cards refill.