Keeping rate warning despite today’s bond rally

A lot of economists are saying today’s S&P’s negative outlook for U.S. debt is ‘no big deal’ but markets are reacting otherwise. Stocks are down sharply (Dow -212, S&P 500 -21) and bonds are continuing Friday’s big rally (FNMA 30yr 4% coupon +31 basis points, 10yr Note +34 basis points). Our WeeklyBasis report Saturday predicted

Stocks Highest Since Summer 2008: Dow Tops 12,000. S&P Tops 1,300.

We mostly focus on rate and bond markets, but it’s worth noting the opposite side of the trade today. Rates rose about .2% today because manufacturing inflation spooked bond markets, but the inflation is from a good trend of growth (this table shows growth trend). Stocks liked the news, with the Dow ending at 12,040,

Ridiculous Market and Movie Character Overreactions

Markets often overreact. Like last May 6 when the Dow dropped 1000 points after Greece’s parliament voted on measures to control it’s out of control debt. Or even like today when rates rose .2% after New Home Sales rose 17.5%, making mortgage bond traders think the economy is fixed. It’s enough to drive you insane.

Return on Stocks vs. San Francisco Property: Jan 2000 to Oct 2009

Someone sent the graph below comparing stock indices to San Francisco Real Estate form 2000 to present. Obviously there are a lot of assumptions here and this cannot dictate any individual’s property investment decision, but worthy of debate. One of The Basis Point’s investment management contributors had this to say about it: Makes me want