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Who Controls Interest Rates-
The Few hundred NOT the Fed
Bill Ackman pushes for immediate interest rate hikes- check it out
Via its massive buying of Treasuries ($80B per month) the Fed is the most important player in the bond market but only one player. The rest of the few hundred major players far outweigh the Fed. Who are these few hundred? They are the bond (fixed income) portfolio managers around the world working at-private equity funds, hedge funds, mutual funds (such as the great mutual fund I got my start at in 1969) pension funds, foreign governments. The most famous name is probably still Bill
Gross FWIW) but Bill Ackman is a famous and highly respected name too..
As described in ‘The Money Game’ by AdamSmith (my second favorite book on speculation), these individuals know each other and talk to each other and today what they are talking to each other about is this Ackman article. And because enough of them agree with Ackman that interest rates need to go up NOW, this explains why the June 2022 Eurodollar (my favorite short) has been going down in the last couple weeks. And I guarantee that those of the few hundred that are still massively long bonds are getting nervous. And as George Soros explains in my third favorite book on speculation- the Alchemy of Finance- that nervousness can lead to more selling of bonds including Treasury bonds- a kind of feedback mechanism Soros terms reflexivity.
I recommend therefore that those of you damaged by a crash in the bond market should adjust by at a minimum selling stocks (except gold and silver mining stocks) in order to gather more cash- MUCH more cash.
Big Bob the Bond Bear