Energy Investing - Confused? - Energy Investing - InvestorVillage

This is a semi-private group. You are free to browse messages, but you must be a member of this group to post messages. Join This Group

Group: Energy Investing   /  Message Board  /  Read Message


Rec'd By
Authored By
Minimum Recs
Previous Message  Next Message    Post Message    Post a Reply return to message boardtop of board
Msg  441008 of 534473  at  8/13/2022 2:11:05 PM  by

Under the Radar

 In response to msg 441004 by  kenlevine
view thread

Re: Confused?

“So what is causing these sophisticated bond traders to get it wrong in your opinion?”

Great question. I can only speculate on their blind spot(s):

1) very, very few professional traders working today were adults during the last period of great inflation, the decade between 1972-1981. Almost universally all of them were raised in the period of great disinflation between 1985-2020. They have no comprehension of what causes inflation or how inflation can become entrenched into spiralling wage expectations and the perpetual debasement of currency valuations through consumer spending habits and expectations.

2) traders see 8-9% CPI inflation and know from their textbooks in college Econ classes that you need a fed funds rate 1-2% above this level to tame inflation permanently, as accomplished by Paul Volcker. This suggests we need a 10% Fed funds rate and a corresponding ten year treasury of say 12-15%. This causes panic amongst traders. Inputting these assumptions causes equity and bond markets to implode. Consequently, a collective willful ignorance ensues to deliberately assume this risk away, for the benefit of their own livelihoods.

Under the Radar

     e-mail to a friend      printer-friendly     add to library      
Recs: 16  
   Views: 0 []
Previous Message  Next Message    Post Message    Post a Reply return to message boardtop of board

Msg # Subject Author Recs Date Posted
441048 Re: Confused? Wilk 8 8/13/2022 8:20:51 PM

Financial Market Data provided by