Monday April 2, 2012
The head of the Bank of England gave a speech in 2005 which became known as the Maradona Rule
He used an analogy with a Soccer Player which gave the speech its memorable title. But...
Mr. King was, like all Central Bankers, suffering from an excess of self importance. Central Bankers really believe that they and they alone set interest rates. Jim Rogers has pointed out that in fact Central Banks are a player but hardly the player any more. At the CME interest rates from FED Funds to the 30 Year bond are traded every day, and by every body, not just central bankers.
Bernanke's claim that he will keep rates low is rather like the rooster claiming that his crow raises the sun each morning. Our FED has been able to follow interest rates lower because we are in a deflationary environment, that is why all the mortgages are worth so little. And once inflation begins again, thanks to trillions parked in banks with no where to go, there wil be nothning the Central Banks can do to stop it.
We are in a period of economic stagnation. Interest rates are not low because Bernanke deems it so. Interest rates are low because there are simply not enough productive uses for the money. Apple has $100 B in the bank and will no doubt declare a dividend, as there is no better use for the money! Interest rates are the rent of money, when properties go empty, rents are low!
Mr. Market continued to ignore the summation index and moved higher today. Next target, 1427-1440. CEF also moved up which is our current recommendation as the dollar weakend. It looks like the FED will continue to purchase stocks and bonds.