Jun

24

It is interesting to note that there have been 92 days over the last 15 years, that's six a year, that bonds and stocks have both been down 1/2 on a daily basis. But three of them have occurred in the last month. The red colors on our DailySpec graph illustrate this in part. Looking at the concurrent of down 1% and 2% days, we've had 3 years without such events but 3 of them in last month. We are entering a different world where the old regularities much be reconsidered.

Anatoly Veltman writes: 

Of course you remember that going into October 1987, it was the pervasive downdrift in bonds which eventually got the better of stocks. The other element was the currency wars, which Jim Baker didn't handle appropriately.

I speculate that should the bond market of today continue its route, then stocks will follow in much more blistering fashion than Mr. Rogan predicts.

Gary Rogan writes: 

I don't think I predicted that stocks will not go down substantially. In fact, my point was that Ben really wants them to. My other point was that he wants bonds to go up. However if neither he nor any of his colleagues at the Fed say anything of substance, I see absolutely no reason for both of them not to go down together, perhaps in a spectacular fashion. I'm not capable of making any kind of time-based predictions, but they are both overvalued on any kind of substantive basis and what has been keeping them both up is liquidity from the Fed. Now if Ben and company keep making disparate noises, some about tapering and some about doing the opposite, while keeping QE to infinity that would be such a mess that I wouldn't even attempt to predict how that will turn out. Ben clearly wants the redirect all the liquidity into bonds, but whether the bond vigilantes will let him do that is anybody's guess.


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