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Gotta Laugh- $ slaughter city-Folks
March Euro now up 2 cents against the $-when was the last time you saw that big a move-the answer is you haven't-that IS HUUUUUGE! Trade Safe!

 

What the hell was Brian4 talking about tonight with regard to the dollar? I don't see it making a big move?

 

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=i

 

And as for the EUR/USD, thing's barely moved?

 

http://www.forex-markets.com/quotes.htm

 

Lookin' for explanations,

 

Jimi

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Here, we go again with this business of whether stocks are overvalued or not. Both Yardeni and Luskin are full of crap.

The Fed model has two significant advantages; firstly it is easy to calculate and secondly it conveniently suggests that stocks are currently cheap. Unfortunately the relationship between bond yields to company earnings is theoretical nonsense but I see the problem more as the old apples to oranges comparison.

 

Conventional bonds provide a nominal income stream that remains constant regardless of inflation whereas company earnings are a real income stream that fluctuate with inflation. But if nominal bond yields decline due to a reduction in inflation expectations why should that in itself affect the required real return? At the same time if real yields on bonds decline due to lower expected economic growth so do real returns; how can such an environment possibly be good for equities?

 

The whole thing is patently nonsensical and this has also been empirically demonstrated by the excellent and rigorous London based research firm of Smithers & Co in a paper called ?The Myth of Yield Ratios? which shows that there is no correlation over the life of the US stock market and that it can only be found by data mining selected periods. For anybody interested they might supply the report on request:

 

http://www.smithers.co.uk/dyn.php?pgtype=k...mime=php&pgndx=

 

In the meantime some might find a chart I have been playing around with interesting:

post-7-1059985706.png

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GREENSPAN JUST A CARNIVAL BARKER

 

Adam Hamilton has it right - Greenspan is just a broken down old carnival side show magician - doing a pea and thimble trick

 

He has two thimbles - one marked deflation the other marked inflation.

 

He puts the pea under the deflation thimble and asks the bondholders to bet.

 

Guess which thimble the pea ends up being under????

 

I think ther bond market has just indicated which thimble it thinks the pea is under.

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GREENSPAN JUST A CARNIVAL BARKER

 

Adam Hamilton has it right - Greenspan is just a broken down old carnival side show magician - doing a pea and thimble trick

 

He has two thimbles - one marked deflation the other marked inflation.

 

He puts the pea under the deflation thimble and asks the bondholders to bet.

 

Guess which thimble the pea ends up being under????

 

I think ther bond market has just indicated which thimble it thinks the pea is under.

Alan plays the thimble for the Dire Thraits (used to be a decent thaxaphone player, too).

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He has two thimbles - one marked deflation the other marked inflation.

 

He puts the pea under the deflation thimble and asks the bondholders to bet.

 

Guess which thimble the pea ends up being under????

 

I think ther bond market has just indicated which thimble it thinks the pea is under.

I think that is highly debatable.

 

At this stage it is in my view at least equally plausible to argue that the recent back-up in yields is the first signs of a growing realisation of Washington?s fiscal recklessness. In other words a situation resembling the early 80s that caused (real and nominal) interest rates to balloon.

 

On the other hand signs of incipient commodity price inflation can probably largely be attributed to dollar weakness.

 

CRB Index in Euros:

post-7-1059995604.png

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