AI
Monday, July 28, 2003 1:58:25 PM
Here's an excerpt from today's 21st Century Alert morning briefing.
The real action lately has been in the bond market. The sheer size and scope of the wealth destruction in the bond market makes the stock market look like a penny stock bulletin board. The scope of the moves up and down in bonds has been absolutely staggering, especially in terms of dollars won and lost.
The question is where is all this money going as it comes rushing out of bonds? It's not going into stocks, which have simply moved sideways. If this were truly a case of the financial markets prophesizing a major economic recovery, stocks should be soaring in direct response to this bond market sell-off.
Perhaps tellingly, the U.S. dollar has also been selling off along with U.S. treasuries. So a case can be made that foreign capital is simply pulling out of the U.S. markets. Greenspan's jaw-boning has cost them hundreds of billions of dollars, and they're tired of it.
If this foreign capital flight is indeed occurring, then it is vitally important from a big picture "macro" perspective -- because foreign capital in-flow has been the thing propping up our economy, making up for the lack of savings in the U.S. If foreigners lose their desire to finance our asset- based economy -- and it looks like this bond sell-off could be the first warning of this -- then a destructive chain reaction could be in the works for global financial markets.
A lot of people will be badly burned if this scenario unfolds, so I'm pointing it out now in the hopes that we aren't among them. I'm planning on monitoring this as closely as possible.
The destabilization of the bond market by the Fed has to put everyone on red alert that we are now living through an incredibly difficult and dangerous investment environment. At the very least, things are not as rosy as the incredibly seductive Wall Street hype-machine is leading everyone to believe.
The real action lately has been in the bond market. The sheer size and scope of the wealth destruction in the bond market makes the stock market look like a penny stock bulletin board. The scope of the moves up and down in bonds has been absolutely staggering, especially in terms of dollars won and lost.
The question is where is all this money going as it comes rushing out of bonds? It's not going into stocks, which have simply moved sideways. If this were truly a case of the financial markets prophesizing a major economic recovery, stocks should be soaring in direct response to this bond market sell-off.
Perhaps tellingly, the U.S. dollar has also been selling off along with U.S. treasuries. So a case can be made that foreign capital is simply pulling out of the U.S. markets. Greenspan's jaw-boning has cost them hundreds of billions of dollars, and they're tired of it.
If this foreign capital flight is indeed occurring, then it is vitally important from a big picture "macro" perspective -- because foreign capital in-flow has been the thing propping up our economy, making up for the lack of savings in the U.S. If foreigners lose their desire to finance our asset- based economy -- and it looks like this bond sell-off could be the first warning of this -- then a destructive chain reaction could be in the works for global financial markets.
A lot of people will be badly burned if this scenario unfolds, so I'm pointing it out now in the hopes that we aren't among them. I'm planning on monitoring this as closely as possible.
The destabilization of the bond market by the Fed has to put everyone on red alert that we are now living through an incredibly difficult and dangerous investment environment. At the very least, things are not as rosy as the incredibly seductive Wall Street hype-machine is leading everyone to believe.
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
