The Market’s Knockout Punch Is Still To Come

Source: Wikimedia

Publisher’s note: It’s Will Bonner here, publisher of the Diary.

Dad is at a conference today and can’t write his regular update.

So, here’s a piece from the archives that explains why the Fed’s attempt to rescue the economy is doomed to fail… and why real pain for stock and bond investors is yet to come.

The Market’s Knockout Punch Is Still to Come

The Fed’s EZ money policies will either succeed or fail. Either way, it will be a disaster.

If they succeed, interest rates will rise… and America’s debt-addicted economy will get the shakes.

If they fail, the Fed will double down with further acts of reckless improvisation – including bigger doses of credit – until the whole thing blows up.

But let’s give credit where it is due. The recent employment numbers speak a kind of success. In spite of the Fed’s policies, the US economy is not only still alive… but also it’s getting back on its feet.

If this is so, it is good news for the people who have finally found meaningful employment. As for the future of the US economy, it is a disaster.

Goodbye, Gentle World

What’s the most important thing that is happening in world markets?

C’mon… you know.

Treasury prices are going down; Treasury yields (and interest rates) are going up.

We are not sure if this will continue. But we guess it will. Like all guesses, it comes with a caveat lector: It ain’t necessarily so. Mr. Market is a fooler. And he could be fooling us now.

But a change of direction in the bond market is inevitable. And if the current fall in bond prices marks the start of a long-term secular bear market, it will be devastating.

But for whom, exactly? How? When?

A generation has come of age in a time of falling interest rates (which move in the opposite direction to bond prices).

When the last turn came, the boomers were just reaching maturity, setting up families, beginning their careers and starting to think about investing.