When fixed-income investors conclude that the central bank isn't going to raise rates any time soon, ... there tends to be a convergence of rates.
The surprises should be on the upside. It all adds up to very good fourth-quarter numbers.
It's been clear that the Fed concluded rates were too low.
The market goes through these bizarre mood swings. All of a sudden, people are concerned that we're in a soft patch and that it may get worse before it gets better.
Earnings are still going to grow as interest rates and inflation remain low.
The bigger bubble is actually in the financing of homes. Mortgage lenders have loosened their lending standards. Rather than telling a lot of would-be buyers, particularly in places like California, that they don't qualify, they're coming up with all sorts of so-called innovative alternative financing.
For two years, we've seen this tremendous increase in prices, yet the core inflation rate has stayed at 2.3 percent or less, and the only explanation for that is globalization means inflation is contained.
I think the folks at the Fed would like to raise the federal funds rate as high as they can short of seriously depressing economic growth. They want to make sure they have plenty of room to ease next time they have to do so.
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