To Huaron : about Rates.

[#1]

Here's an excellent answer to your rates-direction question.Just apply it to the SA Bond market using our Short(overnight) rate ### As in... www.elliottwave.com/features/default.aspx?cat=mw*aid=2978*time=pm It proves the case via Charts, that the overnight rate always leads the FED rate.

[#2]

Right said FED : at www.resbank.co.za/sarbdata/rates/rates.asp?type=cmr..Just compare, in liquidity(important) and for simplistic terms, our Shortest Bond rate to the Longest.There be the boiler room activity of SARB rate-policy.

[GL]

zarp, an observation and a question.
Observation: Of course bond yields lead interest rates - the market is a forward looking mechanism. So if the market expects lower interest rates in the future, then bond yields should decline ahead of interest rates.
Question: How does knowing that bond yields lead interest rates help you to make money?

[#4]

GL : I use the example on the Chart displayed at above elliottwave website. In October 2000,3-mth U.S Treasury rates started to fall and the FED started their rate-cutting in Jan2001.How to make money out of this ? = watch where the Market is at the same time and you'll know(with a sufficient time window) that Money-flow is going positive soon, and that will kickstart a new Rally( in this case,from April2001 to June2001).The DOW screamed up to hit the 2000 High and fell to a lower Low.... and then Greenspan had to keep this going till the " Rally-failure Rally-failure" bottomed in 2002-2003.He only stopped lowering rates in June2004 ? (I think.)###.So, here we are at 9 months and the TOP40 is cruising.Debt is at an all-time High and the game is played by the Money,whilst the poor get hit first....but, importantly, the Rand has devalued by 40% since April-May2006.So now you know that cost-push Inflation will kick in even harder as the Currency Market says : "Up the Rates, or else.".I'm sure there must be some SA source to plot this pattern on our bonds( I haven't looked)...### It's a warning system and it's warning since June2006.It's all just a currency-devaluing game now.What can that Rand buy in Mar2007 compared to Mar2006....that's the secret of adjusting the inflated values to reality.Hence,my preoccupation with Kruger Rands as the only store of Value and the foundation of any SA investment strategy.( at least 30% of assets)...Adios.

[#5]

GL : Just a final thought ; the FED has held rates for 6mths+ now.Reason : to contain the Housing collapse since the high of Dec2005( a lot of that money from rates-down 2001- June2004 when into Monopoly USA ( a game the Family and all pets can play)...If it fogged a mirror it got a loan.## Mortgage meltdown in progress since Dec2006( now at -45 Mortgage-lending institutions.)...The Dollar will be sacrificed, to save the Mkt as best possible.The Central Bankers will keep pumping Supply to mask the Dollar-drainage.I believe the Dow can Double-top and maybe(MAYBE) have a brief streak North over Resistance.However, the Game of Bulls is over for now.How do I know ? Go Look at a Dow 3-yr Weekly chart.See where the price-action is.Waaaaay up in Overbought on the Upchannel..To be Long is....high-risk now.Our Financials should sell-off first( if they follow the USA tendencies.

[#6]

Truly, the final thought : If the Dollar drops its trousers revealing a Eunuch, the Yen will rise with sheer momentum.and the Carry-trade will go instantly limp with fright.Our TOP40 will shout: " Boot Camp !! "...and there's quite a little drop coming till 22000 Support according to Point and Figure Price Objectives.25000 tomorrow less 3000 potential downside( and in quite a hurry too.)...this USA earnings-season pump will be the final hurrah for a while.NO 1 PRIORITY.Watch the Dollar Index religiously.80 is Support.

[#7]

Hi Zarp. I still don't understand something. Private equity is massively buying up public companies and possibly other private companies - and they are using debt to finance it. This just before the market goes down 50%? This is what I don't understand. The only reason I can see for people to borrow now is that the interest rates will fall like lightening down to 0%, but at the same time, there won't be any money to borrow anymore. So might as well borrow now. Any thoughts?

[GL]

Eish Zarp - that's way too complicated for a mere mortal like me.

[#9]

Huaron : Private Equity(as in Richard Gere in 'Pretty Woman' - the Asset Stripper) was the Buzzword in 2006,much like the IPO scenario once was.It's just buying companies with leveraged money.laying off people,issuing Bonds,paying off the interest and squeezing the margin as best as possible,as long as possible.( Yet another Paper-game,there are so many.).In this end-game environment of devaluing paper, it's best to pay Borrowings(if one can) and be in quality Gold/PM-shares,Cash and Gold coin.Back in 2003,when the rates were first being cut over here - yup - that was the time to Borrow.