Posted by
john on Thursday, December 04, 2008 2:11:40 PM
From Doug Kass, courtesy Larry Kudlow's kudlowsmoneypolitics blog. According to Mr. Kass, we are witnessing a "once in a lifetime short opportunity in fixed income investments".
I agree. After all, how much closer to zero can we get? Besides which, I'm becoming more and more convinced by the day that, as the old French economist (Jacques Reuff) might say, "The Age of Inflation" is upon us. It is only a matter of time, as I see it, before significant inflation premiums are once again priced into bonds. (See Robert J. Samuelson, "The Great Inflation and its Aftermath").
This will not be good for stocks. It would be the flip side of the phenomenon which occurred beginning November, 1994, when the 30-year yield peaked at, if I recall, 8.04% on Election Day! The downward reversal of the long-term interest rate trend in the wake of the Republican takeover of Congress was the precipitating factor in the stock market boom of that decade (though other factors, particularly the capital gains rate reduction in Clinton's second term, later contributed greatly).