As US economy looks up for the last time US Treasuries getting ready to retest the high in yield
Fred Day
Oct. 22, 2006

The US economy has shown some strong resilience. It is bending but not breaking. When that happens, very soon the path of least resistance goes towards the north. The US economy may have started expanding forcefully again. The momentum in price deflator, the unemployment claims, the wage rise acceleration index, the firm capacity utilization rates of above 80% all point towards a higher growth.

The key to the real story is how bad is the housing sector? The realtor has started asking their sellers to abruptly lower the prices. The panic is real and buyers are even shunning great deals. Signs of some kind of a bottom is evident. Even if we are in massive real estate bear market, there will be some rallies in between. The real problem is that the housing market is illiquid and therefore the depressed prices go far before correcting itself just like the pendulum went far high than it should have.

The leading indicators were the key signal after all. Every one in the market overlooked it. They focused on negative side of the market. The employment outlook on the paper is as good as it will be ever under the current underemployment environment.

The economy will accelerate surprising every economist. The Fed will run and hike rates three times before realizing their mistakes. The stock market has already signaled the coming boom. The treasuries are confused. The 10 year notes will most likely test the 5.2% again.

Website: http://www.idoctor.com/financial/editorial/41.asp

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