Bond Outlook May 7th

One of the inevitable results of masses of cheap liquidity is that its search for a home creates bubbles, i.e. it pushes asset prices up beyond anything that might be called underlying value or the result of matching basic supply and demand. One such bubble is commodities, and another, the resurgent stock market. That, at least, is our best explanation of rising stock markets despite a plethora of negative news (increasing losses in the financial sector, ever tighter credit, mortgage losses at Fannie Mae, many bankruptcies and the like).