Show a Little Respect

In the 1990s, Democratic political adviser James Carville said:

“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.” (source). 

The younger generation of market players likely views the bond market as a boring, sleepy beast, incapable of doing much of anything. 

However, looking at that quote by Carville should give insight to the fact that every so often (but certainly not recently) the bond market "vigilantes" can take over. And then the bond market becomes a scary place indeed. 

In fact, there is an argument that the Fed is much more scared of the bond market acting up as opposed to anything stocks do. While that may be generalizing, as rates keep plowing higher and TLT (below) fails to bounce, the risks of a major risk-off event early next week may be rising. 

I do not like to fear-monger or be sensationalist in market prognostications beyond having some light fun with the headlines. But if rates keep forcing The Fed's hand, and stocks keep getting spooked beyond today's heavy giveback of the last two days of gains, I have no choice but to show respect for the vaunted vigilantes. Trust me when I tell you that market history suggests they are the toughest of the tough. 

Headed into the bell, I am nearly full cash in my trading account.