Oil Rises Above $72 Amid Iran Tensions
June 27, 2006 (AP)

Oil prices rose slightly on Tuesday as traders focused on minor shipping delays along the Gulf Coast and Iran's supreme leader rejected the need for nuclear talks with the United States.

and

Housing's hot, but builders' stocks are not
June 27, 2006 (USA Today)

Stories of weakening demand for condos in Florida and homes across the nation have economists calling for the housing market to cool off after its long hot streak. The stock market, though, is saying it could be headed for a deep freeze.


AntiSpin: The Pushmepullyou of the U.S. economy is rising inflationary pressures from increasing energy costs and a slowing housing market and economy. What's a Fed chairman to do? What are the bond and precious metals markets saying?

Treasury 10-Year Notes Fall a 9th Day, Longest Slump Since 1974
June 26, 2006 (Bloomberg)


U.S. Treasury 10-year notes fell a ninth consecutive day, the longest slump since 1974, as the prospect of a 17th straight interest-rate increase by the Federal Reserve this week prompted investors to demand higher returns.

"Market psychology is reaching an extreme,'' said Paul Macrae Montgomery, president of Montgomery Capital Management LLC in Newport News, Virginia, who has followed the market since 1971. "We are in a long-term bear market, so any rally is going to be a matter of weeks, not months.''

"A very aggressive Fed's been priced into the market already,'' said Vincent Boberski, senior vice president of portfolio strategies at FTN Financial in Chicago. "What we're going to see are signs of a slowdown in housing and the broader economy.''


Along with rising inflation. The falling bond and rising precious metals markets may be telling us that the Fed is likely to chicken out on Thursday, raise rates only .25 points and call for a pause instead of raising .25 and leaving the door open for more increases. Or maybe the markets are saying that even if the Fed raises rates .5% and leaves the door open for more hikes, inflation will continue to rise due to increased energy costs, all rising due to a toxic mix of growing demand and supply insecurity.

The Fed is likely to keep raising rates longer and more than the markets currently expect.