Thursday, May 24, 2007

About Time They Figure That Out

Well, I've been telling them for months, but do they the listen to me? No, they knew, didn't they? Just a harmless little bunny, eh?...Or to return to the subject matter, Wall Street finally realized what I told them two months ago: there won't be any rate cuts from the Fed anytime soon. So, the bond market, have sold off big time with the yield rising from the 4,52% it stood at back then to 4.86% now.

In the meantime as bond yields have soared, stock prices have also soared, up 6% since then. Which of course means that the relative attractiveness of stocks have fallen significantly. If this reflected a permanent lowering of risk aversion and therefore the risk premium of stocks,then that would be sustainable. But if not (as seems more likely), then we could be looking at a stock market correction.


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