First and most important, the Fed is about to start selling securities to reduce the monetary base.
Second, interest rates cannot go any lower.
Third, inflation is starting to grow.
Fourth, the US Treasury has a lot of borrowing to do.
All this means that bond prices are poised to fall, and long-rates rise a percent or so - to start with.
At the same time, the stock market will look carefully at earnings, and will punish any company with weak results. There will be opportunities for short sellers.
As inflation takes hold, the dollar will begin it's long slide.
Paterson's advice is to match up the book and extend liabilities further.
* * * * * J B K * * * * *
San Francisco
James B. Klein
Paterson Financial Services
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