The recent unpleasantness in Bonds has caused a huge drop in closed
end income funds.
These funds are now selling at big discounts to NAV.
If the Fed raises rates to a whooping 1.5%, what will munis and REITS
be discounted down to THEN? Perhaps 8% on Munis? Or 11% on REITS?
If the bank gives you a 1% yeild after Greenspan raises rates, not
too many will rush for it. At least not for long.
BUT, THE COMING BIG SELL OFF OF ALL INCOME WILL CREATE A BUYING
OPPORTUNITY.
INDEED, A 50 BASIS POINT FED RISE COULD SEND THE DOLLAR TO 105 OR 110
ON THE EURO! GOLD WILL PLUNGE EVEN MORE.
Stocks of course will plunge too......
THE ENTIRE MARKET SEEMS POISED TO OVER-REACT TO EVERY EVENT NOW.
AND, THAT OVER-REACTION IS EXACTLY WHAT CREATES BUYING OPPORTUNITIES.
Now there is a real possibility that this is all a "fake crisis" to
scare people out of income. That's what happen last July, remember?
Wall Street is capable of putting on quite a show for mom and pop
when it wants them to run a certain way.
My hunch is that this is all just another "head-fake." This entire
so-called "boom" is so fragile and so tentative; and local and state
governments are so under-funded;
HIGHER RATES NOW WOULD BE A LONG TERM DISASTER.
GREENSPAN WILL NOT SPOOK THE MARKETS THIS WEEK WITH MORE RATE FEARS.
