Bonds vs. the stock market

As IB’R pointed out earlier this week, the bond market and the stock market are at odds over where the economy is headed. Bond rates are dropping; a sign of pessimism, while the stock market’s surging; buyers expect the economy to keep improving.

Only one group can be right but while waiting to see who is, the Wall Street Journal reports that mortgage rates have followed bonds down and 5% loans are available again. “The difference between 5 1/2% and 5%,” the article quotes one mortgage expert, “is shopping around.”  I have no insight on whether the economy is truly on the mend or, rather, my guess is based on conservative fiscal thinking and could be wrong as likely as being correct, but a 5% fixed mortgage sounds attractive enough that would-be buyers hesitating on buying now might want to consider it. If they find a good value on a house, that is.

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7 responses to “Bonds vs. the stock market

  1. Anonymous

    Generally, smart fixed income traders tend to have a more sober, analytic, prescient perspective on economy and capital mkts than their more manic-depressive, emotional equity colleagues, esp equity guys on sell-side or long-only buy-side who tend to be salesmen/cheerleaders by nature

  2. WCI

    Here’s an interesting (hopefully) article from the CalculatedRisk blog on delinquent/foreclosure rates per state along with the bankruptcy filing rates per state. It’s completely sortable.

    http://www.calculatedriskblog.com/2009/08/bankruptcy-filings-and-mortgage.html

    Nevada is 2nd in foreclosures (Florida is in the lead) but leads personal bankruptcy filings. This, in a state with no personal income tax, that’s amazing. In other deflationary news Ca. just announced an increase in PIT, I read about it maybe a week ago and sure enough, my latest direct deposit shows a substantial deduction, oh happy day. I’ll have to wait until Monday to see what THAT is all about.

    Yup, that’s going to help Californians spend more to help with the recovery.

    In happier (less bad) news, Ca. ranks 8th in delinquencies and 10th in bankruptcy filings.

    Connecticut comes in at 25th on delinquencies and 40th in bankruptcies.

    NY is 37th in bankruptcies and 20th in mortgage delinquencies.

  3. Anonymous

    Big states (or cities) are hardly monoliths

    Usually, smarter guys know how to manage risks better than others; Silicon Valley/Manhattan/Greenwich arguably have world’s highest concentrations of smart, shrewd quants….and IQ levels in FL/NV/AZ/inland CA/MI, etc are truly at retard level

    Income tax rates mean little; CA’s 10% is looking cheap vs NYC’s 13%…..and NV/FL have lots of morons and scammers and can’t attract legit business despite their low taxes

    TX is a decent, low-tax economy but heavily energy-based, not IQ-based…always risky in a virtual, IQ-centric era when major cos. and wealthy/talented people will easily relocate to wherever is best balance of COL and QOL

  4. Retired IB'er

    Anonymous
    August 30, 2009 at 12:14 pm

    You seem to have had a totally different experience in life than I. In general, I have not seen a high correlation to high IQ and wealth (i.e. just because you own a house in Greenwich, Palo Alto, etc. you must be smart).

    Quite frankly, “luck” and “drive” appear to be much bigger factors than high IQ in creating wealth. This is not to suggest that a certain level of IQ isn’t generally necessary for success, it is, but it isn’t sufficient. Some of the smartest people I have encountered in life have not been the most “successful”, and certainly have not been the wealthiest.

    • christopherfountain

      Bravo, IB’R. It’s my own theory that determination to get rich is by far the largest determinate of (financial) success. The two brightest guys I knew, my father and his brother, did just fine in their careers, one on Wall Street, the other in medicine and education, but fabulous wealth? They had better things to do. I think there are many people who, once they secure the basic necessities of life (a flexible term, that might or might not include a sailboat, vacations to St. Barts, whathaveyou), turn their attention to other things that they find more interesting than wealth accumulation. Nothing wrong with either approach to life, but I wouldn’t ever gauge a man’s intelligence on his wealth or lack of it.

  5. Cos Cobber

    I’m beginning to think G550 is posting on this board as paid contributor from the Texas Board of Viral Marketing.

    I’ll admit, he/she has me thinking.

  6. Retired IB'er

    Chris wrote:

    “I think there are many people who, once they secure the basic necessities of life… turn their attention to other things that they find more interesting than wealth accumulation.”

    That certainly has been my approach and why I punched out in my late 30’s. Came to the conclusion I was never going to catch Bill Gates and so what was the point, just to get an ever bigger house. So it was on to the next thing for me (an ever elusive target I might add)…