Yesterday’s action was a full serving of ugliness. The action we described in the morning post lasted through the day, except for crude oil, which joined the tank brigade with a 6%+ retreat. We briefly saw a 1 handle on the 10 year Treasury. Think about that for a moment. A 1 handle on the 10 year. That’s nothing less than amazing. If it marks the low, great, and if not…things are not going to be very great at all.
On a more hopeful note, we had a pretty strong volume selloff but didn’t revisit the recent low, which means buyers saw value and came into the market. However the futures this morning are quite negative. I’m hopeful that we won’t see a new low but, as hope is not a strategy, I’m staying on the sidelines. It’s starting to feel like being Cal Ripken’s backup. Anyhow, today’s action is going to be important. We stay above the low going into the weekend, and there is some cause for optimism. We close out with a new low, and there are some dark and scary places on the road ahead.
Returning to the bond yield, I had been making the comment in discussion for several years that we were turning Japanese and European at the same time, meaning that we had chronically falling growth and dis-inflation, coupled with an expanding welfare state. With the folks in Washington looking determined to beat the European out of us (a sensible notion – look what it’s done to the Europeans), I suppose we will be getting on with the all out pursuit of becoming Japanese. Minus the positive external trade balance.