Friday, June 8, 2007

Bond yield up, stocks drop, housing worsens

An old expression reappeared during the 1990s stock market bubble to explain how Internet and telecommunications companies with no apparent prospects, and run by children, were able to go public and then see their stock prices shoot
up: "If the wind blows hard enough, even turkeys fly."

A gale force wind of money has circulated the planet for the past few years, putting everything from large public companies to large empty office buildings to flight. As inflation increases globally, the Wall Street backed American Association for the Prevention of Cruelty to Flying Turkeys has been lobbying the Fed for if not a rate cut at least forbearance on hikes. But recently the bond market started telling the Fed that time is running out, and stock market investors are taking notice.

Read the full article from itulip.

If you are a stock market investor you have no doubt been following the economic news and the bond market’s change of heart the last few days. Many are waiting for the other shoe to drop. Is this the beginning of the ‘Great Unwinding’?
Probably not.

Sure, a reckoning is due, but greed will win out over the short term and investors will storm back into the markets as they always do, pushing them still higher over the summer months.

Or this could be the straw that broke the camel’s back, setting into motion the cascade effect many of us have been dreading.


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