bonds are flying ..thanks to economy weakness,hoping in other hikes;nut,what about inflation?

hoping in NO other hikes...of course

"Today's report indicates that the housing sector continues a significant decline but one that is still moderate by historical standards. We can expect spillover effects to moderate spending on household durables such as appliances. The economy seems to be on the soft landing projected by the Fed. The bond markets will love today's data. Equity markets should begin to factor in the fact that the economy is slowing-especially for housing and household durables."

Bill, is Tanier still doing these summaries? I have noticed a very distinct change in tone recently to the "all is fine/soft landing " camp. To wit, there is NO ANALYSIS as to why this decline is "moderate" or why this data reinforces the "economy is on the soft landing" path of the Fed. It is like she was told to cut the harsh language of just a month ago.

Bill,

Housing starts in January were not almost double - more like ~50% more - 2,300 versus 1,600 now. It looks that way on the chart because the lowest level is 1,300. It is a huge decline none-the-less.

I find the Econoday slant to be rosy enough for CNBC.

The bond market isn't as optimistic.

The housing situation is getting worse by the minute -- although the equity market at present levels does not seem to be concerned.

At some point people will start noticing -- the next major move will probably be down in equities, although further short term gains are likely considering the rosy lenses most people are using.

In addition, yesterday after-market a builder Meritage Homes (MTH) reported preliminary results that showed both high cancellation rates and a drop in gross new orders.

This continues the steady stream of unexpectedly higher declines in these key components of future outlook. How anyone can foresee a soft landing in all this is beyond my less-than-modest powers of imagination.

No position in MTH, though I'm short a number of other builders.

I expect bonds to continue moving up as interest rates level off and the economy moves into a full-blown recession. I took a modest position in TLT. A little pricey now, so I'm hedged. But I think this will continue its upward trend through '07.

One hedge fund losing 5 billion in a week is going to make regulators nervous. Counterparty risk anyone? Housing starts continuing to crumble should make holders of last resort-banks-edgy. The military takeover in Thailand ought to make investors nervous. A VIX at 12.4 represents opporuntity for those wishing to speculate on increased volatility over the intermediate term as the risk premium seems to mispriced. Volatilities in SPY ans TLT are historically extremely cheap and traders can buy both puts and calls making money in either direction if price ranges begin to expand. 6 to 12 month options look best for those types of straddles or strangles.

Byuing VIX may be an oportunity. I am not so sure about options on VIX. There are big spreads between bid and ask that I found unappealing. You may be buying high volatility. It seems that options writes are nervous and incorporated these risks in their price. Do your analysis!

I would agree the bid ask differential is quite wide in VIX options. When I refered to the VIX being low I was not advising buying vol on the VIX but using the low measure to point out risk premiums are low in general. I mentioned SPY and TLT as potential straddle or strangle plays if you believe the vol is cheap.

what a day - total goldbugz washout , anyone left :)

Best dip in a while, the way I look at it ;)

golds short covering rally should be expected any day now.

With wealthy Asian capital fleeing Thailand and other emerging countries and also leaving China as they raise their currency and slow their economy - it will be interesting to see if they prefer the US$ assets or Gold.

tradesman

This chart spookes me:

http://usmarket.seekingalpha.com/article/17172

uhuh

optionoracle, thank you for your precious post.