Been a while

Good article on Califia Beach Pundit with his take on movements in the US government bond markets.

As part of the article he gives a quick overview of the various memes that are & were prominent in the markets …

Before QE2 was even a possibility, yields and inflation expectations were declining from May through August. The fuel for this move was the belief that sovereign defaults in Europe would spread contagion through the global economy that could result in a double-dip recession in the U.S. Weaker growth, in turn, would intensify deflation pressures, thus making 10-yr Treasuries an attractive hedge. So everyone piled into 10-yr Treasury bonds, driving their yield down from 4.0% to 2.5%.


It is interesting to reflect on these memes, and to reflect on the confirmation bias & overconfidence amongst commentators during the May – August period Grannis highlights in the above excerpt. Evidence contrary to the prevailing memes was dismissed, the potential for governments and governments authorities to speak and act to stem the problems was also dismissed, often with a sneer and condescension towards those suggesting something might be done. I have written before on this blog about the danger of overconfidence in one’s forecasts and prognostications, & when combined with confirmation bias the ability to actually see reality, or imagine an alternative to the confidently expected scenario is severely limited, often by 100%.

Grannis’ blog ( ) is one of the best I have found because he questions the prevailing memes, often using … shock/horror … data to highlight the weakness in the prevailing meme(s) and to suggest that there may well be an alternative scenario playing out.


And here’s another really interesting post, this time from Prof. Mark Perry’s Carpe Diem blog,
( ). This is another great blog, Perry often uses data to question & skewer commonly-held beliefs. The post I have linked to shows how inadequacies in trade-data measurements distort the real value of iPhone imports from China … More importantly (to me) the post goes some way to skewering my (commonly held) belief re China’s trade/currency policy (see previous rants… I mean, posts). Bugger it …


As for the markets … geez … zzzzzzzzz … I am in WTF land? Is this slow sideways movement (ES) taking the place of any downward ‘correction’ that I was expecting? (BTW, I really hate the term ‘correction’.)

A ‘correction’ in time, not price? Next stop 1300? I dunno, like I said: WTF?


Ok. That was all I was going to post, but check this out too. David Merkel does all the hard work, making it easier for dummies like me. Thanks Mr. Merkel, much appreciated:

Redacted Version of the December 2010 FOMC Statement

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