At least that is what the markets are letting known is the driver and that is certainly part of the story.

Traders see through the stories but pay attention to them as well a.... Here is the TLT, an ETF representing 20 to 30 year bonds; rising interest rates have been killing it price:

 

 

If, that linked article is right, 10-year rates are going to 3%, that could put mortgages and the 30-year up towards 5% -- without the FED moving the overnight rate (the only rate they really control).  The market may see that as a way to keep Fed rates low longer (Bernanke threatened an increase on May -- see the result on the chart above).  All rates are linked together from short to long - see the yield cu....  The "longer term rates" must stay above the "short term rates" for banks to stay profitable -- they make a lot of their money from the "carry" between the rate times, borrowing short and lending out long.  Play with the graph on the right and move a vertical line (that appears when you click on it, or you can animate it with the button) across the time scale.  Note the inverted curve (shorter rates higher than long term rates)  at the 2000 stock market peak and the similarly flat curve at the 2007 stock market peak.  Compare that to our current yield curve, held artificially low by the emergency (going on 6 years) federal policies, anchoring it at 0%.  Normal economic cycling has been suspended by the 5-year emergency measures!

 

"So we want stocks to go up for years?  Well hold down interest rates -- a crappy economy will help.  So what if it cripples growth to a crawl?  We will worry about that later.  What a juvenile selfish approach to managing our economy!   

 

Note the move to near 0% (bottom of the yield curve at the origin of the graph) overnight rates in 12/07, carrying through the present -- what makes that possible is the almost unlimited printing of money (TARP, QE1, QE2, Operation Twist), massively inflating the US money supply (To make matters worse, most foreign countries are in the same boat or even worse off!). While stocks may retrace in price somewhat, until that policy is rescinded (or at least there is an announcement of a time-table for rate adjustment (up), stocks should be buoyed at some intermediate level.  If they start to drop very low, despite the extremely loose money policy, that would be a very very bad sign for the market as well as the economy.

 

TLT should bottom out around 90 to 100.  If stock prices fall steeply, bond prices are likely to rise again.

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Comment by Don MacDermid on August 19, 2013 at 9:21am

Government now actively subsidizes CONSUMPTION and non productivity as top priorities.    Individual savings are punished by zero interest, hammered by runaway inflation that devalues saved purchasing power into pennies on the dollar, plus taxed and into oblivion!

should read:

Government now actively subsidizes CONSUMPTION and non productivity as top priorities.    Individual savings are punished by zero interest, hammered by runaway inflation that devalues saved purchasing power into pennies on the dollar, plus taxed and regulated into oblivion

Comment by Don MacDermid on August 19, 2013 at 9:15am

Today's stock market is basically an aneurism that hasn't reached its fatal breaking point.    Of all the wealth stocks generated, there’s an obvious absence of increased tangible productive wealth creation within the USA FOR MANY YEARS!    In fact, one can't count the endless productive infrastructure of finance, mining, raw material processing, factories, etc. that have disappeared by bulldozing or left to rot in Hiroshima settings like Detroit, Chicago, and other endless cities now infested with absolute poverty!

The greatest gift to humanity is capitalism where savings investment and productivity are rewarded in a free competitive environment.     The greatest threat to humanity is monopoly, be it evil individuals or the curse of socialism, communism, etc!

Government now actively subsidizes CONSUMPTION and non productivity as top priorities.    Individual savings are punished by zero interest, hammered by runaway inflation that devalues saved purchasing power into pennies on the dollar, plus taxed and into oblivion!   Our corrupt progressive socialist government has rewarded US "global monopolist corporations” with trillions best described as crony capitalist corruption that included massive "pac-man" attacks that “bankrupted and swallowed” smaller banks, in unbelievably massive quantities – like whales sucking in plankton!   Similarly, interest free capital and “unneeded infrastructure assets” were “relocated” to Communist China slave labor camps, free from taxes, regulations, unions, Constitution and law!

The progressive monopolist government takeover of our country includes restricting the US owned supply of oil to force the population to buy foreign oil at monopolist prices.   Forcing the US to import roughly 2/3 of its crude oil supply further put our nation at mortal risk!   We can’t defend ourselves from enemies!   Big cities absolutely can’t survive without transportation supplying life sustaining supplies!

We are a nation with a Constitution and law that is being undermined and overthrown by subversive government officials.   Constitution and law enforcement remains obstructed because the senate majority of progressive democrats and republicans freely violate oath and duty of office!

LIGHTER SIDE

 

Political Cartoons by AF Branco

Political Cartoons by AF Branco

ALERT ALERT

Horrible: Democrats Set The Constitution On Fire With Fraudulent Impeachment

House Democrats unveiled two articles of impeachment against President Donald Trump on Tuesday morning after an investigation that violated fundamental provisions of the Constitution and the Bill of Rights.

The investigation of the president began with the complaint of a so-called “whistleblower” who turned out to be a rogue Central Intelligence Agency employee, protected by a lawyer who had called for a “coup” against Trump in early 2017.

Democrats first demanded that the “whistleblower” be allowed to testify. But after House Intelligence Committee chair Rep. Adam Schiff (D-CA) was found to have lied about his committee’s contact with the “whistleblower,” and after details of the “whistleblower’s” bias began to leak, Democrats reversed course. In violation of the President Trump’s Sixth Amendment right to confront his accuser, Democrats refused to allow the “whistleblower” to testify. They argue the president’s procedural rights, even if they existed, would not apply until he was tried in the Senate — but they also invented a fraudulent “right to anonymity” that, they hope, might conceal the whistleblower even then.

Schiff began the “impeachment inquiry” in secret, behind the closed doors of the Sensitive Compartmentalized Information Facility (SCIF) in the basement of the U.S. Capitol, even though none of the testimony was deemed classified. Few members of Congress were allowed access. Schiff allowed selective bits of testimony to leak to friendly media, while withholding transcripts of testimony.

Speaker of the House Nancy Pelosi (D-CA), having allowed the secret process to unfold, legitimized it with a party-line vote authorizing the inquiry. The House resolution denied President Trump the procedural rights enjoyed by Presidents Richard Nixon and Bill Clinton, and denied the minority party the traditional right to object to witnesses called by the majority.

Rather than the House Judiciary Committee, which traditionally handles impeachment, Pelosi also deputized the House Intelligence Committee to conduct fact-finding; the Judiciary Committee was turned into a rubber stamp. Schiff held a few public hearings, but often failed to release transcripts containing exculpatory evidence until after they had passed.

In the course of the Intelligence Committee’s investigation, Schiff quietly spied on the telephone records of his Republican counterpart, Ranking Member Devin Nunes (R-CA). He also snooped on the phone records of a journalist, John Solomon; and on the phone records of former New York City mayor Rudy Giuliani, acting as President Trump’s personal lawyer.

Schiff’s eavesdropping violated both the First Amendment right to press freedom and the Sixth Amendment right to counsel. Yet he proceeded undeterred by constitutional rights, publishing the phone logs in his committee’s report without warning, confirmation, or explanation, alleging that Nunes and the others were part of a conspiracy to assist the president’s allegedly impeachable conduct. When Republicans on the Judiciary Committee asked the Intelligence Committee’s majority counsel, Daniel Goldman, to explain the phone logs, he refused to answer,

Ironically, Schiff had done exactly what Democrats accuse Trump of doing: abused his power to dig up dirt on political opponents, then obstructed a congressional investigation into his party’s and his committee’s misconduct.

Democrats’ articles of impeachment include one for the dubious charge of “abuse of power,” which is not mentioned in the Constitution; and one for “obstruction of Congress,” which in this case is an abuse of power in itself.

Alexander Hamilton, writing about impeachment in Federalist 65, warned that “there will always be the greatest danger that the decision will be regulated more by the comparative strength of parties, than by the real demonstrations of innocence or guilt.” Democrats have fulfilled Hamilton’s worst fears.

The Trump impeachment will soon replace the 1868 impeachment of President Andrew Johnson — which the House Judiciary Committee staff actually cited as a positive precedent — as the worst in American history.

In service of their “coup,” Democrats have trampled the Constitution and the Bill of Rights. The Republic has never been in greater danger.

You don't get to interrupt me

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