BRIEFS

The market spoke today. Bond yields spiked in anticipation of a stronger second half, the real idea behind Bernanke and crew ending the QE madness.

Bonds don't like the threat of rising interest rates. A stronger second half, should it happen, means less deflation and less deflation can spell rising inflation.

The bond market's been in a bullish gear for a long time. That in itself shouldn't be misconstrued. But at some point regression to the mean might again become meaningful.  Bull markets usually take on a life of their own and usually go on longer than most think.

During the QE madness banks have been privy to what essentially is free money. It was money they were suppose to lend out for the sake of the general market to help stimulate a recovery not play the carry game with.

Boys may boys as the old saying goes and banks will be banks. Making money on the spread is the real business of banks, especially the Wall Street kind. If you bother to check, bonds and stocks for the past few years have been moving in opposite directions.

Thursday's sell off in both may signal the beginning of the end of that.

What this most likely means for investors is rising volatility. The VIX, an index that reportedly gauges investor angst, was up nearly 30% and CNN Money's Fear and Greed index slumped back into negative territory.

In commodities those denominated in US dollars like oil and gold took a hit with oil falling below $95 a barrel as the money seeking a safer harbor poured into the dollar pushing it higher against it trading partners.

A stronger dollar would suggest an anticipated rebound for the US in the second half. If that happens things could indeed get interesting.
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                           The Return of Volatility

If you're a believer the sell-off might start you to consider some of those issues we've mentioned in previous posts. Conventional wisdom states a stronger dollar won't be good for US firms that make most of their money overseas. The hyped-up news about surplus US energy supplies might also provide opportunities that many aren't expecting.

Familiarity may breed contempt, but volatility often times begets opportunity. 
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