Tuesday, September 27, 2016

Erik Townsend & Mark Valek 
With Barry Habib: Where Are Interest Rates 
& Real Estate Prices Heading?
Hedge Fund manager Erik Townsend of Macro Voices is joined by Mark Valek and Barry Habib in discussing the possible consequences of the recent FOMC meeting and the likely effects on the future .. "We could see a U.S. 10 Year Treasury 1% yield if we’re headed to a recession, which is at a 50% chance over the next 24 months. Outside of an event like that, it’s difficult because things have changed around the world. We broke below 0 yield, which theoretically made upside potential and capital depreciation endless and the amount of negative yield could be infinite in theory. Now we’re seeing this move back toward 0, and this means that maybe capital depreciation and downside in yield truly is limited and in absence of an event, this means yields won’t go much higher since we don’t have much inflation, but they’re going to go much lower. In the last weeks we saw a little raise in interest rates on the long end. A blow off event is more likely, from a bond price perspective. A major bull market usually ends with a blow off. The thing that will end this bull market is inflation. The latest move in correction in long term bonds was triggered from less than expected from ECB or Bank of Japan. We need these low interest rates, and they can’t afford to decrease those. ECB will likely enhance their stimulus program after March 2017 and Bank of Japan may try to also taper down. The debt situation will prevent them from stopping these QE programs and they will have to increase once more, which could bring this blow up in Treasury or bond prices. For the time being, it’s going to be difficult for the banks to justify pushing rates below zero because they haven’t been yielding the desired result." .. 35 minutes
LINK HERE to a partial transcript

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