Observations On The Bond Bubble From TrimTabs And TCW
TrimTabs' Charles Biderman discusses the flow of funds, and the interest rate outlook for 2010: nothing too outlandish - the Treasury bubble thesis revisited, as well as the biggest issue of all - the roll (much more on this from Marla soon). Also some observations on the interplay of money markets and alternative funds, extensively discussed here. Also, according to TCW's Chief Global Strategist the treasury bubble will burst in a few months, coupled with a collapse of the dollar. What this means is that rates will surge. What this also means is that once rates surge, equity values will be whacked as the cost of capital will no longer be zero (sorry Zimbabwe Ben, but you are completely wrong - a cost of capital of zero is the number one reason for pretty much all bubbles). So what do futures do? Up, up, up. The stocks-bonds divergence trade is alive, schizophrenic, utterly insane and well.
So let's get this straight: PIMCO said yesterday to get out of the bond market. Now TCW has joined the chorus calling for a bond bubble. How many more of the world's biggest bond managers will it take for equities to decouple from the mysterious futures buying bid? We suggest you forward all relevant correspondence:
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