NEW YORK (
Real Money) -- The amount of fretting that's been done about the
Federal Reserve and stimulus tapering over the last two years is astounding to me, as it should be to you, after this continuing monster decline in U.S. interest rates.
It's like the whole stock debate got hijacked by those who report on the Fed's every move, when it turns out that bonds are actually taking a natural ebb and flow right now, unmoored by actions of the central bank.
Think about what happened Thursday while 10-year interest rates went back to the 2.777% level. First, we got existing-home sales that showed tremendous growth -- much more than what most people thought, despite attempts by some to call the numbers anemic. Those attempts have been made on every piece of data, pretty much from the bottom. It's another shameful distortion, but let's save that for another day.
Second, we got still one more bank, this time KeyCorp
(KEY - Get Report), saying loan demand has picked up. This dovetails with the vast majority of the banks out there.
Third, we had a new high in the Dow Jones Transportation Average, the index most sensitive to commerce. That's right: This is an index that's meant to be a harbinger of things to come. Tell me that's not the definition of business strength.
We had a very strong jobless-claims number, again indicative of underlying strength.
We had a spike in the fuel that heats your home, and a bump up in gasoline prices.
Every single one of these should have sent yields ever higher. But they didn't because -- are you ready, skidaddy? -- U.S. bonds represent real value vs. the bonds of a lot of countries that are doing far less well than we are, including many, many politically troubled ones. It's a better economy and low inflation against higher inflation and worse economies. That's what is determining interest rates -- not the Fed or the endless commentating on the Fed's various moves. You can call it a "flight to quality." I call it a "return to rationality." It makes sense to invest in the strength of a country's bonds at a time when all rates really aren't that far apart from each other, even though some weaker countries' interest rates should most certainly be so.
Now, with the equity averages giving back some of those gains that could have been had by so many, I look back and I am just plain steamed that the discourse was so hijacked by people who know nothing about stocks. These people, nevertheless, managed to keep people out of stocks for thousands upon thousands of points with their worry-mongering. They did us -- you and me -- a real disservice.