It's about the stock market, not about the economy.
"Jim Bianco" is a critically acclaimed independent musician, singer, songwriter and producer based in Los Angeles, California.
More Jim Bianco on Wikipedia.At some point, we will see the returns come back to bonds to compete with stocks. But it doesn't look like it's September or October of '97 for the moment. It looks like that's still a way's off.
The problem with the Greenspan Fed is that it has been a 'make it up as you go along' Fed. There is no philosophy with Greenspan. He changes his mind about all of this stuff.
The volatility that we've had in the stock market is higher than we've been accustomed to over the past several months. We've now finally broken into the range where the moves are greater than 1 percent, but as long as they're not 2 percent or 3 percent, we're not in that range where you would start to call them extraordinary.
No one has a feel for where the bottom is. The bond market is in a holding pattern waiting to see what the stock market does.
They've really lost their minds [at the Fed] if they really think that's the kind of thing that's going to do anything other than collapse the economy.
One thing to understand about interest rates is that they're bad in both directions. Having rates at an extreme low is bad. By encouraging them to go further, the Fed only makes it worse.
It's not so much what bonds need to do. The focus is stocks and what that market does. Stocks need to re-introduce the element of risk and fall 10 percent off their highs to make bonds look good.
We're seeing a bubble bursting in the bond market. It was way overdone; there was really no justification for bonds being at [such a low] yield.
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