Culled from a professional bear blog:
Puplava: If I look at your analysis, so far you would argue that QE2 has failed, and a lack of broad money growth will mean that growth and inflation expectations are too high. That implies, likewise that equity prices should fall, and yields rise which you believe could lead to deflation and a bad environment for equities.
Napier: Equities are overpriced and bonds overpriced. But the thing I am saying that is really quite different is normally when the economy slows bonds do well, that is the normal relationship. That's what everybody expects. What I am saying is a much more frightening scenario, where the economy slows and bond yields go up. And the reason I am suggesting they go up is the matters underpinning their path of huge inflows of foreign central bank capital simply stop coming or slow very dramatically.
Well, then.
Here at Barry's place, we learn that the 10-year cracked 3% yield today--but going down, not up.
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I'm STILL WAITING for huge inflows of foreign central bank capital to simply stop coming or slow very dramatically.
These guys have been preaching Minske Moments for 3 years yet nothing has fundamentally changed in the sovereign debt market. The U.S. Full Faith Treasury continues to be the safe haven asset in times of economic crisis. This current flight to quality episode is just one more example of it.
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