Don't Fear the Taper

O'kay. Lot of chatter about how nervous "the market" is about the dreaded taper in the Fed's buying of US Treasury bonds. The talking heads are trying to convince us that the stock market is nervous about the prospect of rising long term interest rates. Maybe there is SOME nervousness, but it is summer and the volume is very low. Even on the declining days such that they are so far. There may be some declines in the averages to come, but I see money moving from the tech and medical to the basic materials. This is not hard to see.

But rising interest rates seem to FOLLOW inflation. Looking at the following chart from dshort I can not see where interest rates get out ahead of inflation and drive it down. Interest rates follow. The only exception is the Fed Funds rate when Volcker came in and artificially raised it to kill the inflation that was raging back in the early 1980's. Other than that interest rates, and that bond market that is so feared, followed inflation.

My copy of this chart isn't working so well. Take a look at  dshort's blog. This is where I initially found the chart. Good site!

dshort

And here is Blue Oyster Cult singing "Don't Fear the Taper".

All our times have come
Here but now they're gone
Seasons don't fear the taper
Nor do the wind, the sun or the rain... we can be like they are
Come on baby... don't fear the taper
Baby take my hand... don't fear the taper
We'll be able to fly... don't fear the taper
Baby I'm your man...

La la la la la
La la la la la


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