First, the whole premise that the central bank of a country should be interfering in markets like this is shameful. Or better put, did the central bank ever apply the breaks to "cool things down" on the housing sector when it was screaming higher? Of course not... there were no actions even 1/100th of the magnitude when times were good... but all the king's horses (and men) have been called to the wall on the flip side of a bubble (that they helped create)

The two title insurers we own have been obliterated of late - while we are "somewhat" hedged by our short of the iShares Barclays 20+ Year Bond (TLT), I continue to be amused at how vicious everything reacts in short durations now. It is as if the difference between 4.75% and 4.95% 30 year mortgages mean all housing activity will cease if you believe the stock prices. Even more so, homebuilders should be hit much harder than title insurers as there will still be foreclosed homes selling (they are about half of all sales in America at this time) at 4.75%, 5%, or 5.5% interest rates. But that's too granular for the stock market... and after all the title insurers can suffer while new home builders can go up... ? huh? Anyhow, apparently yesterday 30 year mortgage rates shot up quite significantly so for the first time not only did bond yields rise (as they have been doing for over a month now) but even the market the Fed is pressing its foot on, "stopped behaving" as the overlords wish. Some talk of 30 years jumping to 5.2%ish rates yesterday after sitting in the 4.7-4.8% range for a long while.

p.s. someone sent me a message that CNBC said yesterday this rise was a good thing... i.e. higher rates will 'force' panicked buyers to buy homes 'now' before rates rebound... oh those cheerleaders are shameless. Low rates are good because it gives homeowners cheap money but so are rising rates... because it causes a buying stampede. I really need to change to a straight out bull - all news is good news.

We are seeing a reversal of this trend today as long term bonds finally rebounded a bit (bond yields move in inverse of prices - so as bonds rebound, yields fall - i.e. what easy money government wants to happen). Recall I exited almost my entire short of TLT 48 hours ago below $91; I started slowly reshorting today north around $94, hoping for something closer to $96 to short more (May 27, 2009: Bookkeeping - Covering Majority of iShares Barclays 20+ Year Treasury Bond)... as I stated in that piece "Too far too quickly in my opinion" but I continue to love this trade in the year(s) to come. But for that market, the move of late has been parabolic.

While this is sort of wonky talk, and frankly the bond market never held my attention much in the previous 15 years - it now has mattered a ton the past 1.5 years. And will only continue to matter more as we can expect the market to react more and more to the battle between (a) all the interference by the powers that be throw at the bond market v (b) the "free market". It is sort of fascinating and I will assume at some point the bond market will be bigger than the "bottomless" Federal Reserve balance sheet.

I probably gloss over this stuff to some degree since I've talked about it in many posts, and done it piecemeal but here is a good Bloomberg piece that describes the battle between manipulation and "free markets". Keep in mind (AGAIN) the whole consumer recovery story is based on jobs (dead), low rates (manipulation left and right), and low commodity prices especially energy ("the market" is ruining that one). And let me give you the other side of my argument to be fair and balanced. Bona fide bulls say yields rising and commodities rising are great because it signals the return of super charged days ahead. In a normal world I'd agree, but many of our "markers" have been so meddled with who knows what anything is saying anymore.