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07/14/2010

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Greg Pinelli

The yield curve is influenced by market forces at the long end..and manipulative (ie, Fed) at the short end. Since the Fed has already determined that DEFLATION is very..very serious they are keeping low end rates as low as possible..essentially 0%...

The long end is declining in rate as de-leveraging takes place. You'll notice that every time (!!!) the market goes down the US 20 year T-Bond goes up (rate decreases)..that means money moving out of the Market is moving into something more liquid.

This is how (I believe) this will work itself out..
1. The Market (including European and some Asian) will decline because Deflation becomes more and more inevitable....
2. Long rates will continue to decline towards the March 2009 2.2% level..like it or not this is classic deflation..

My tone may put some off..BUT..the State always likes deflation more than inflation..contrary to popular press and commenter opinion. Inflation..ALWAYS..works against State control. And the State is nothing if it is not controlling.
Helicopter Ben is a nice little picture..but a fantasy. Money won't be pouring out..it will be sucked down a disappearing rat hole....

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