From today 8/25/08

"Federal Reserve policy makers couldn't ask for a stronger mooring in the face of disappointing inflation news. A pair of reports on consumer and producer prices for July showing year-over-year increases of 5.6% and 9.8%, respectively, the fastest pace in 17 and 27 years, failed to rattle the US Treasury market."

What's going on? "One school holds that bonds are mispriced. Buyers are either complacent or smoking something stronger than tobacco. Even if they are in full command of their faculties, they are choosing liquidity over yield."

Russell Comment --Bond people tend to be very sophisticated. I think they are thinking in terms of the great international de-leveraging that may be coming up. Or why would the 10-year T-notes be selling at a lousy 3.8% yield which is actually below the rate of inflation? Obviously, the bond crowd sees deflation ahead. And nobody else does. Maybe the stock market is just getting wind of it now!

Bond people may be very sophisicated, but deer are also very good at survival. Still that doesn't stop one from staring straight into the oncoming lights of a semi on the freeway every once in awhile.

Why does the deer do this? It is confused and placed in an entirely unrecognizable situation. There is nothing in its instinctual memory banks that tells it how to respond. It's ancient ancestors did not see semis bearing down on them. The programming isn't there.

I think we are seeing a lot of people staring into headlights right now. Many of them are from a younger generation. Their grandparents have all died off or been put in nursing homes to rot and this generation just doesn't know what it is seeing.

It's members haven't read about it, because in school they are being taught about famous Americans like Sacajewaya and Malcolm X rather than Thomas Jefferson and Benjamin Franklin. In their spare time they are reading John Grisham rather than Adam Smith. They are listening to Eckhart Tolle rather than reading the Bible.

In short they are programming themselves and have been for almost two generations how not to behave properly when a crisis comes.

Bull