Will bonds crash cause stocks melt up?

Discussion in 'Economics' started by kashirin, Apr 5, 2010.

  1. the strange woman on yahoo tech ticker believes so

    http://finance.yahoo.com/tech-ticke..."-in-stocks-sonders-says-461389.html?tickers=^dji,^gspc,spy,dia,^ixic,qqqq,TBT&sec=topStories&pos=9&asset=&ccode=

    for me it looks counter intuitive
    if bonds will pay higher interest rates and no inflation I would put more into bonds

    if inflation gets higher then likely stocks PE will compress which will limit upside and still no reason to buy stocks

    anybody can support that lady's opinion?
     
  2. she forgot to mention deflation. But she did or the text on the bottom of the video mention increased Market volatility...

    Its just a more complex argument to fool people into equities.

    I personally believe an equity crash is being planned to engineer the big guys back into bonds.

    Fundamentals aside regarding the equity side, the government needs to have their debt serviced, and the big guys- pension funds, foreigners etc, have to play.

    There is a weird phenomenon that happens when massive money is printed. If the money can't go into the productive or speculative side of the economy (remember, we had this already), and it can't go into emerging Markets (we have experienced that) where can it go?

    It goes into yield. Concurrently with the fact that its a balance sheet recession and debts need to be paid as well.

    You might actually see a weird setup- China currency actually goes down, commodities sell off, including EM currencies, and a major retracement rally in USD. By default this is good for bonds, and if this all transpires, rates will be back at 0 again, and bonds will be like gold with yield.

    But Charles Schwab's employees aren't going to tell you that retail people are actually right.
     
  3. This woman must be on crack. There's really no mechanism that can make higher bond yields positive for stocks.
     
  4. The government has screwed up our economy and financial system beyone anyones wildest imagination
     
  5. S2007S

    S2007S


    The economy is broken in such a way it cannot be fixed by the methods they are carrying forward.
     
  6. Rising interest rates, bonds go down. Money flows out looking for return and with commodities extended (for the most part), real estate still correcting, the only place left is equities. So she's correct but not because they're a good buy but because Bubble Ben printed Bubble 3.
     
  7. Refer to Argentinian default back in 2001 to see what kind of consequence bond and currency melt down might have on the equities. Truly scary stuff (if you're short that is). See what happened to their equity index from late 2001 until 2008.

    http://finance.yahoo.com/q/bc?s=^MERV&t=my
     
  8. jnorty

    jnorty

    right and before there stk mkts skied they crashed to hell the same as brazil and mexico. when the rates initially sky they crush stks and then the currency gets devalued and the mkts sky. but it won't happen here
     
  9. Yeah, so here we sit in no man's land. Give me another good crisis dammit!!!
     
  10. I believe what the woman was saying is that higher bond yields mean lower bond prices. If this extends into a bear market for bonds with bond prices continuing to go lower and more bond sell offs the money will have to go somewhere. And they are hinting it will end up in the stock market or possibly the commodity market.

     
    #10     Apr 5, 2010