People would rather overpay for bonds than underpay for stocks

well- if 30 year interest rates drop to 0%, will that be enough to prop up the housing market and get consumers spending again? Will it be enough to prevent people with underwater mortgages to avoid bankruptcy?
 
bullshit. there is large short interest. there is no such thing as rotation anymore.. it's gunning for the weak open interest.

Quote from ASusilovic:

Aug. 16 (Bloomberg) -- Investors are moving more money than ever before out of stocks and into bonds, widening a valuation gap and convincing JPMorgan Chase & Co. and BlackRock Inc. that now is the time to buy equities.

About $33 billion flowed out of funds owning U.S. shares this year even as the economic recovery sent free cash flow for American companies excluding banks to 6.8 percent of their market value. That’s the highest level compared with corporate debt yields since 1960, Credit Suisse Group AG data show. About $185 billion was sent to bond funds through July 31, the most on record, according to the Investment Company Institute.

The biggest money managers say concern the U.S. will slip into a recession is overblown and that individuals piling into fixed-income securities for their relative safety are making a mistake. David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds, says record low yields show there’s too much demand for bonds and aren’t a sign the economy is headed for the second recession in three years.

“People would rather overpay for bonds than underpay for stocks,” Kelly said in an interview from New York. “It’s a reflection of an extraordinary prejudice. If people are at an emotional extreme, it means that at some point there’s got to be reallocation of cash away from the bond market toward the stock market. Ultimately, it’s bullish.”

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aRooQ_CS052M
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If real asset prices are deflating at around 4% per year, then a 2% return is really 6% without the associated risk of holding stock.

Bond holders are not stupid. They are smart. You may get a 6% yield on a good stock, but you have to risk 100% of your capital to do so and in this market people are not willing to take that risk.

The low premium is telling us that deflation is real and upon us. The bond market drives the share market, not the other way around. Investment banks are pointing to the bond yield and screaming 'stocks are cheap' but what they are not saying is that they are very risky right now also.

Runningbear
 
Quote from Runningbear:

If real asset prices are deflating at around 4% per year, then a 2% return is really 6% without the associated risk of holding stock.

Bond holders are not stupid. They are smart. You may get a 6% yield on a good stock, but you have to risk 100% of your capital to do so and in this market people are not willing to take that risk.

The low premium is telling us that deflation is real and upon us. The bond market drives the share market, not the other way around. Investment banks are pointing to the bond yield and screaming 'stocks are cheap' but what they are not saying is that they are very risky right now also.

Runningbear
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So, how much do have bond holders to risk for a 6 % yield from this very moment on or with other words : what´s the risk / reward for them now that T Bond Futures are passing almost 134.00 ???:confused:
 
Has there ever been a time when Blackrock was not bullish on equities.? Does a week ever go by w/o them trotting Bob Dahl onto CNBC to pimp stocks?

I mean they are they largest long-only asset manager on the planet. Why is it news that they see stocks as being undervalued? Its their job to be long stocks. They make money when they can convince others to be long stocks.
 
Quote from tradingjournals:

Do you have a reference for that number? Thanks.
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Well, if he was looking at real estate property, we're talking about -10% a year.

His point is valid whether the deflation rate is 1%, 2%, or 4%. The fed is pumping cash into the economy, but that can't last too long. It's going to get ugly.
 
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