Keep an Eye on the Bond Market

The guys in Chicago didn't care for Bernanke's speech today.  The 10 year bond is about to retest an important resistance level:

If we clearly  break through the 3.6% yield level then there is no resistance until we get to around 4%:

Should we be surprised by the bond yields given the inflation we are seeing in commodities?  Ben Bernanke actually sat there with a straight face today and tried to say there was no inflation.

My answer to this is what are you smokin there pal?  Whatever it is I want some of it.  Bonds are obviously rising because they are concerned about inflation.  The fact yields are moving higher at a time where we have great geopolitical instability in the Middle East is not a good sign.

I say this because bonds are a place that people usually like to run and hide when things in the world look unstable.  Today they have decided dive into gold instead.  The yellow stuff is up about $24.

The Bottom Line

The Fed shows no intentions of backing off from their easy money ways.  Bernanke thinks the Fed is doing the right thing and they use the higher stocks prices as a way of supporting their loose money policies.

The reality here is all they have done is created another bubble.  Today's bubble is a stock bubble that's been created with insane leverage thanks to the Fed's massively insolvent balance sheet. 

This of course comes at a cost which is inflation.  It's amazing that the man has the balz to say such a thing at a time when countries begin to topple as a result of rising food prices thanks the the Fed's money printing addcition.

Folks, if you thought the tech and housing bubbles were bad then you need to hold on tight because you "ain't seen nothin" yet.  These policies are not sustainable and we are starting to see the inflation that we have seen throughout the world start work it's way into our economy.

After watching the unprecedented events unfold in the Middle East the "guns and gold" crowd all of the sudden don't look so crazy to me anymore.