If You Think You Know Where Interest Rates Are Going, YOU DON’T

Interest rate prediction really does belong on the Vegas Strip (or maybe Macau is even more appropriate).

Obviously, the raw power of the Fed is never to be underestimated – but then neither is the critical importance of Chinese economic health (or lack thereof) – not to mention a countless array of other indices and measures ultimately capable of sending trends in one direction or another. With the US Treasury market having just endured severe losses in May, (the Barclay’s U.S. Treasury index fell 1.71%), a majority of economists and traders appeared to be predicting a pull-back with regard to the Federal Reserve’s stimulative quantitative easing policies due to gradually improving US and European economies and an overall uptick in global demand. Manufacturing and automotive numbers come out later today which MIGHT provide some clues as to where the Fed (and the broader US economy) are heading. But interest rates themselves???

Perhaps due to increased evidence of a significant Chinese slow-down (or because the folks at the Fed got hammered last night – OR because they didn’t…), a majority of economists surveyed by Dow Jones now expect the market in so-called “safe haven investments” to rise slightly during the coming month.

Trust me: Your odds are at least as good just betting on red or black (especially on a European style “single zero” wheel) .

And even if you don’t trust me, listen to THE MAN himself . . . During Ben Bernanke’s Princeton commencement speech on Sunday, the Fed Chair quipped that, “Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much.”

Now Ben and I don’t always see things the same way, but on that one, I couldn’t agree more.

[“Treasurys Little Change Ahead of U.S. Manufacturing Data, “ The Wall Street Journal, 6/3/2013]

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