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http://www.nytimes.com/2006/08/23/business/23cnd-econ.html?hp&ex=1156392000&en=2e6aba13e683c830&ei=5094&partner=homepage

Existing sales even lower than expected. I think time to lock in rates on longer instruments before it is too late (although Treasuries are up today).
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Existing sales even lower than expected. I think time to lock in rates on longer instruments before it is too late (although Treasuries are up today).


Why? One data point doesn't make that much of a difference. The Fed memebers aren't united over future rates. I think the picture is way to muddy to make decisions based news. We are much better off sticking to our plans, their boundries and their cues.

jack
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It is also unclear to me that the inflation demon has been slain. A lot of the inflationary pressure is not coming from wage inflation and out of control consumer spending: It is coming from commodity and energy price surges. The last time we had such a thing, it was not fun to be locked in for the long term (stagflation).
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Okay,

Let me clarify.

I don't think this latest housing information is just a data point: I think it is one of many data points toward a slowing, if not recessionary, economy. I'm not suggesting rushing into long bonds (20-30 years), but I think those who are sticking to T-bills or the equivalent, waiting for 5-10 year rates to go up will probably regret it. I still think, in a few years, the debt level will come home to roost. I'm not changing my mind about using some 1,2,3 year CDs to fix my ladder, now instead of later.

I think the Fed is going to be in a bind. I agree what is causing inflation is not what goes into core inflation and we are likely to have inflation and economic stagnation at the same time, though I don't think like the '70s.
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"Home Sales Fall to Unexpectedly Low Rate"

I don't quite understand the "unexpectedly" word in this article. Nowhere do they say what was expected. Frankly, sales going down by only 4.1% is unexpectedly high to me. In some of the previously hot markets, sales are down by 20-40%. In particular, I am shocked that sales in the South only went down by 1.2% (the least of all the regions) with Florida (and South Florida with a 30-40% decline in sales) included in the South!

As far as interest rate expectations, I've been wrong for a few months now, since I fully expected rates across the board to continue rising. Instead they have fallen at the long end and have steadied at the short end. I still think that credit demand (mainly by governments) should cause rates to rise, but apparently there is still sufficient levels of excess money that this isn't happening. When the next recession arrives, I have to wonder if the reduction of credit demand (at least among consumers and businesses) might offset the [increasing] credit demand of government, or if we might even see [long term] rates rising during the recession!
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or if we might even see [long term] rates rising during the recession!

Would this qualify as a "conundrum"?

Quite possible. Long term rates didn't respond all that much either to Fed cuts or Fed raises (even less to raises).
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I don't think this latest housing information is just a data point: I think it is one of many data points toward a slowing, if not recessionary, economy. I'm not suggesting rushing into long bonds (20-30 years), but I think those who are sticking to T-bills or the equivalent, waiting for 5-10 year rates to go up will probably regret it. I still think, in a few years, the debt level will come home to roost. I'm not changing my mind about using some 1,2,3 year CDs to fix my ladder, now instead of later.

I think the Fed is going to be in a bind. I agree what is causing inflation is not what goes into core inflation and we are likely to have inflation and economic stagnation at the same time, though I don't think like the '70s.
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Personally, I don't think that it is worth the risk. Floaters and TIPS are about all I find attractive, assuming we are at serious risk for stagflation.
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Could you explain what floaters are?
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Floaters = floating rate bonds. Typically, these might be 5 or 10 year bonds where the coupon is re-set every 3 months. Many are pegged to 3 month LIBOR.
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