Wednesday, March 09, 2005


Yellowstone and T-Bonds

I have been waiting for this: Yellowstone and the BBC
The drama Supervolcano is broadcast in two parts, on BBC One on Sunday 13 March and Monday 14 March. Both transmissions are at 2100 GMT. Two science documentaries called Supervolcano: The Truth About Yellowstone are broadcast after the drama, on BBC Two. Again, these air on Sunday and Monday but at the later time of 2200 GMT
I hope this two part series will be carried on Comcast in Portland. Yellowstone is a supervolcano and many, here and here, have predicted its eruption, soon.

Mover Mike

Over at Kudlow's Money Politic$, I posted a comment:

Larry, if you still think there is no inflation problem, you ought to look at today's T-Bond. It took a big hit. Seems some are worried, maybe you should be, too.
Mover Mike
KarmiCommunist said...

T-Bond?!? Is that like Social Security??? Anyway, i am not sure what it is, but is this it???

If so, then T-Bone has been dropping since about 1982.

"Inflation"...dig this, from Strategic Forecasting: "U.S. interest rates already are the highest out of the three major
economies, and the Federal Reserve has made no secret of its intention of pushing them higher still despite inflation's being in check."

i'm probably missing you point...sorry, Mover Mike, if my questions offend you.

So Karmi, my point is this: The chart you pointed to is a chart of Treasury Bond (30 Year) yields going back to 1977. The highest interest rate on T-Bonds was an incredible 15%+ on government paper. Inflation was in double digits. We have since then been in a bull market in bondsand yields dropped all the way down to 4 1/4% in 2003. Lower interest rates also benefited the stock market. Price/Earning ratios are based in part on interest rates.

Basically, the lower the interest rates the higher the market, or at least that has been our history since 1980. Ny point of the comment, is that things are changing, signaled by the CRB going to a 24 year high, and now today T-Bonds appear to have completed a large top. Then the dollar has been very week, falling from 112 in 2001 to 81.5 today. The Euro in 2000 was cost .82 to the in USD and now it costs about 1.34 to the in USD. When foreign holders of our currency get nervous, they sell and that drives up interest rates. So now look at the chart of T-Bonds today:(This is a chart of the bonds, not yields, remember when bonds go down, yields go up)

Go back to Karmi's chart, print it out, and draw a straight line connecting as many peaks as you can. My conclusion is that the great trend we have been enjoying, refinancings at lower and lower interest rates, lower credit card interest rates, car loan rates, etc. is coming to an end. Kudlow disagrees with me. He doesn't see inflation. IMO, The Fed can raise short term rates, but can't effect long term rates. Only inflation expectations can raise long rates. I'm seeing all the signs of another inflation cycle, one, before it's over, will see Gold sell at or above the Dow Jones Average!

Mover Mike

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