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Big in Japan

While I was never a "Dead Head," I remember the phenomenon. The same people attending the same concerts, listening to the same music, reliving their misspent youth. But with the death of Jerry Garcia in 1995 the band disbanded. All good things must come to an end. 

In the same way the current decades-long bond bull market must come to an end. I think it likely that the current increase in interest rates will be followed by a drop as the Fed ain't done yet. What can't continue, won't continue.

So in one sense my feeling is that Bill Gross, the bond fund king of Pimco,  is right:

“Yell, ‘This ship’s going to make it to port,’ Fed, PIMCO, and PIMCO co-captains willing. Those icy Atlantic money market waters are likely to be with us for a long, long time. Have a cocktail, tell the band to stop playing dirges, because you’re gonna be just fine with PIMCO at the helm.”

In another sense, this cannot go on forever. Interest rates less than zero means that there is no reason to buy anything that gives an interest rate. Cash is king, not bonds. The Fed Head experience must eventually come to an end.

Where will it begin?

While they were more than a one-hit wonder, the band Alphaville tells us where it will begin in their most popular song. Apparently Alphaville was "Big in Japan."

Let Them Play Music