Isn't the bond market is tanking in expectation of further discount rate increases by the Fed?

Bill-

Volume contracts on the rallies; expands on the declines. Not good if you are a bull. Lot of supply out there.

The bond guys usuallly have it right. That's the smart money.

We have a very low unemployment rate; the DJIA within spitting distance of record highs; and sky high commodity prices. No chance the Fed is going to stop at 5.25%. IMO, the Fed will keep going until the markets are 5/10% lower and oil/gas/copper prices have come back to reality.

Bill,

Everyone who should know now knows that the true rate of inflation in the US economy has been consistently higher than the numbers provided by the Fed over the past 12 - 18 months. You have been consistently onto this for at least a year. Today, nobody believes that there will be anything other than a rate hike. Propellerheads are now weighing the increasing possibility of a 50bp hike which will "shock" the markets and be the tipping point for the reversal from high-priced commodities, first oil, then metals ( with the likely exception of gold ). As new more aggressive interest rate hike scenarious get to the boardrooms of the nation we can expect a very poor equities market in the weeks ( months?) to come. It is definitely time to step back and wait for the opportunities that inevitably surface in times such as this.

My novice midwestern/islander twist agrees with (iii) a sell-off ahead of a crash in the mortgage-backed asset market.

I may be biased because I have recently lived through a housing peak and crash that was based on a retracting economy. I am not suggesting the US economy is retracting but the fallout from US consumer debt is going to shake the housing market.

We must always remember that 99% of corporations are not loyal to employees. When economics turn unfavorable there is little debate about layoffs, etc.

This is important because there will be more layoffs as the economy cools or jobs ship to Asia. Labor supply will increase, causing wages to stall, etc. etc. (I could pontificate about this forever but will spare you all).

Late credit card payments are already up in Q106.

http://www.aba.com/Press+Room/0627061stqdubll.htm

The average Joe's expense priority is food, power, water, transportation, phone, mortgage, personal loans, credit card.

It's just a matter of time and then the horrible cycle of repos and auctions occurs, equity will deteriorate and similar to margin calls, things spiral.

What would Kudlow say? He might call me unamerican for such blather.

Bonds usually lead stocks but there's a lag time.
I bet equities gold bonds and what not will gain after Fed decision today, rather a lot of worrying going on, at least we'll see a rally after everyone relaxes.

COT report Commercials have been buying the markets including
gold while large traders have been selling. One more rally
perhaps?

Don't read too much into short term bonds action - it is influenced by the FED open market operation and the ESF.

http://www.ny.frb.org/aboutthefed/fedpoint/fed32.html

http://www.ustreas.gov/offices/international-affairs/esf/

Actually, Kudlow mentioned the other day that the fact that mortgage backed securities are holding up well shows that the housing market market is not going to crash. I don't think it will in general either, because in much of the country prices haven't gone up much. But, those who've had the bad luck to have to buy homes on the East or West Coast are going to have problems if they need to sell them in the next five years or so.