The bond market acting like late 2000, Fed is in the mood of denial and dollar ready to explode while stocks enter the massive bear market
Peter Oberois
Dec. 5, 2006

Fed inflation hawks believe the economy is a lot sounder today than in late 2000. But bond investors see parallels to that era, which heralded a string of interest-rate cuts. The number hawkish Fed members far outweigh the doves. They never acknowledged any stagflation. Now they claim soft landing for the economy.

The bond market is telling a different story. It is expecting massive rate cuts in coming days. One of them right and the other is wrong. Either Fed will reduce rates or not reduce rates. There is a possibility that both will be right and that presents an excellent opportunity to long the dollar, short the stock and short the gold. In 2007, Fed will be stubborn denying any economic trouble no matter what the mortgage delinquency rate is. At the same time, the long bonds will keep going higher making the inverted yield curve even steeper. The stocks will collapse. The gold will tend to retest the low 400s.

The stubborn Fed will make the dollar rally as US economy though weak start faring far better than the rest of the world.

The bond market acting like late 2000, Fed is in the mood of denial and dollar ready to explode while stocks enter the massive bear market
Peter Oberois
The stubborn Fed will make the dollar rally as US economy though weak start faring far better than the rest of the world.
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