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Jason Nees
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I have worked as a financial advisor at a couple of the wirehouses and managed money for corporate executives of publicly traded companies. I left the industry to help finance a small non-publicly traded consumer finance company. Now I spend my spare time analyzing companies and economic trends.... More
  • Bond Bubble talk is nonsense 0 comments
    Aug 20, 2010 11:56 AM | about stocks: IEF

    Its a great day for me. I've finally found an article Paul Krugman wrote that I essentially agree with. Krugman argued that "austerians" are wrongly attempting to cut the budget deficit at exactly the wrong time. In theory he is right. We do require stimulus, since we can't get it from the private sector.

    If we cut stimulus right now we would likely extend an already depressed economic environment. This in turn would slow our growth and subsequently our tax receipts and increase the deficits at the same time we were attempting to reduce them.

    However, the steady increase in bond prices reflects an attitude of adjustment for disdain of risk assets and generally weary investors. After seeing steady deleveraging by the public and shunning of credit we have been seeing what may turn out to be a trend into the new reality of frugality. I talk with hundreds of investors weekly and I keep hearing the same message; "I don't care how low the coupons are, I simply can't lose anymore." I won't address the flaws in that logic here but needless to say, I see a trend towards even lower yields.

    On the philosophical side of this article:

    He is wrong is in identifying the "austerians" as Republicans. Democrats and Republicans are fully aware that they will likely lose their job if the have anything remotely associated to a stimulus attached to their name. The austerians are nothing more than the public's overwhelming disdain of misappropriated stimulus. "We the people" are simply done with this nonsense. Until there is a stimulus bill that doesn't involve buying assets from banks at full price, or other covert money transfers, there will be no more tolerance. The Great Recession was simply cordoned off by class. The wealthy aren't in a recession, their assets are being artifically inflated by the Fed while the rest of the population actually deals with the consequences.

    Please see this report by Sen. John McCain and Tom Coburn about other wasted projects.

    Disclosure: "No Positions"

    Stocks: IEF
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