The Bond Vigilantes
This is what the bond market is already starting
to do in fits and spurts. But we haven`t seen anything yet by the bond
vigilantes. The only thing we have seen so far is an $80 Billion
withdrawal from bond funds as investors try to protect principal. Make
no mistake we haven’t even begun to experience any vigilantism in bond
markets.
When this happens the worst thing the fed can do
is try to fight them as the perception that they are out of touch
further erodes credibility, and the market becomes panic stricken where
normal valuations and previous models go out the window.
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