We’ll see if the market continues to say “oh no you don’t”:
First, the TNX this morning. It’s up – again.
And here’s the five year, which has doubled – literally – in yield since the first of November:
Of course the other problem is the “forward view” expressed by commodities. That is, cost-push inflation – the worst sort, in that it destroys margins. Copper, for instance:
Anyone remember James Carville? When Clinton tried to run the deficit machine in the early 90s he got this sort of reaction - and ultimately the market forced him to stop it. This prompted James Carville to quip:
“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the Bond Market. You can intimidate everybody.”
The Fed “controls” rates on the long end with QE2 eh? It controls rates even in the direct part of the curve it’s monetizing, which includes the 5 year, right?
Uh, maybe not.
We’ll see if this continues and, if it does, the so-called “tax and spend deal” currently on the table is quietly dropped with some sort of pretext, probably in The House where Pelosi has a perfect excuse – all she has to do is refuse to bring it to the floor and say that she can’t whip up the votes.
