The bond market is now correctly starting to price in Fed rate cuts and a recession. How soon until stocks catch up?

Treasuries are ``priced for calamity,'' said Brian Edmonds, head of interest rates in New York at Cantor Fitzgerald. ``

Get your Monday stock market prediction in here

No "anons" allowed. If you want your post to show up on this thread, you have to at least click "other" and call yourself something.

What's Monday gonna look like? For the Dow:

1) Up

2) Down 1 to 199

3) Down 200 to 499

4) Down 500 to 999

5) Down 1000+

____________


Here's my take:

Too bad homedebtors and flippers can't just hit the "sell" button like stock owners, eh? And remember, stocks and bonds are not house prices. Iphones aren't house prices either FYI...

What happened last week in the debt markets, where essentially the engine froze up and exploded, is not fixable. This is the period of "discredit" from Manias, Panics and Crashes that follows all leveraged booms. It will, and it must, run its course. Watch for major LBOs to come apart now.

Since this was the mother of all booms, this period of self-feeding "discredit" will amaze.

However, that said, the impact on stocks on a day by day basis is unknown. Yes, there should be a classic rush to cash and safety, where panicked people sell everything they have to raise cash in a frenzy. But panics take time - look how long the NASDAQ bust took - not just one day.

Meanwhile, the meltdown in the debt markets, coupled with a big drop in stocks last week, means that hedge funds are failing as I type. And there will be forced selling in the market as they unwind. The only way for some funds to survive is to risk everything they've got left Monday to try to defend. We'll see if they have enough ammo.

So, my prediction for Monday is the #1 day in the history of the world for stock trading volume. Wild swings. And a big loss (700 points) at the end. But I honestly don't have confidence in this prediction - stocks can be wild. And that's why I'm happy watching from the sidelines, except for my miners, alt energy, oil and REIC shorts.

Why is the Dow up even after the CDO blowup? Here's some ideas, add yours

First and foremost, stocks prices do not equal house prices. Why trolls don't get this I'll never understand - the two are mutually exclusive. iPhone prices don't equal home prices either, FYI.

Here's a few reasons I see for stocks going up recently:

1) Investors frantically getting out of depreciating dollars and into stocks. One share of IBM going up while dollar is tanking means it takes more dollars to buy that one share of IBM, so IBM shareholders may feel "richer" when indeed they may be poorer. And meanwhile I paid $18.00 for 12 chicken wings here in London the other day... Get it?

2) Bond investors, especially mortgage-backed CDOs and US treasuries, selling their bonds and moving funds into stocks

3) Overleveraged hedge funds, on the verge of blowing up and shutting down, rushing into stocks short term, trying to get the sheeple excited before they get the F out of Dodge

4) Venture cap money is sloshing around in a big way buying up public companies. Buy-outs and rumors of buy-outs driving stocks higher and higher

5) Dead real estate money still looking for a place to go and stocks are a natural

6) Classic flight to safety after the CDO S&P Bear Stearns news with the multinational mega-caps leading the way

7) Hank Paulson and the PPT working overtime

Yes, this will all end and end badly. But enjoy the ride until it does. One BIG fallacy is the view of most that they can ride the wave and get out at the first sign of trouble. What happens when everyone wants to get out at the exact same time? Anyone remember September 12th? Anyone remember Black Friday? Anyone alive in 1929?

My COP, EWJ, EWZ, EWG and my miners are doing fine, I covered my homebuilders last week (pigs get fat hogs get slaughtered, gotta love 100% - 200% gains), I enjoy 5.5% to 6% CD's and savings, and I'm short IndyMac, Countrywide and Retail Holders today. And I wish I had picked up gold at $640, was waiting for my $630 target that never came.

With oil coming up on $80 again, CDOs and hedge funds blowing up, consumer confidence plummeting, housing prices in freefall, and wars and rumors of war all over the place, it feels dangerous out there.

How 'bout you? Where's your money? Are you on offense or defense? And do you understand how the dollar collapse affects you?

HousingPANIC Stupid Question of the Day

Baby boomers have bet their entire retirement on their home's phantom equity, their company's pension, and their stock portfolio held 100% in dollars.

What happens if it all goes poof?

I fear for us. All of us.

Think it can't all go awry? Think the government will be there to take care of you? Anyone remember Katrina?