Treasury rates ended mostly higher Monday afternoon.  The six month Treasury rate was up one basis point to close at 0.24%.  The one year Treasury rate managed to move slightly lower, dropping by one basis point to 0.41%.  The two year Treasury rate was also lower by one basis point; these two maturities were the only terms that dropped in yield yesterday.  The five and ten year Treasury rates both gained two basis points to end the day at 2.38% and 3.47%, respectively.

Two important discussions for the week.  First, during a panel discussion on Bloomberg TV, Meredith Whitney discussed the state of the U.S. economy in which she questioned any future growth in the economy.  Ms. Whitney pointing out that mortgage activity has contracted significantly for the second year in a row and the banks have cut back available credit to their credit card customers by a trillion dollars.  I wholeheartedly agree.  This is a Credession, not a temporary slow down in the economy.  The excessive debt of the past 15 years is not going to be corrected by a one year slow down.  Our economy is far from out of the woods.  Consumer spending is not going to rebound with wages stagnant, lack of credit as Ms. Whitney so aptly pointed out and a loss of real wealth in the form of depreciating assets most significantly housing.

Second segment for discussion.  Jim Chanos this morning on CNBC questioned the strength of the Chinese economy.  I think his commentary was dead on.  Chanos argument hovers around the position that the economy in China may very well be growing, but the data coming out regarding its growth rate is suspect.  It appears highly unlikely that an economy that is rather dependent on exports to nations that have contracting consumption can be growing at a 7-8% rate.  This doesn’t mean that China is not going to be a significant economic powerhouse over the next ten years but the current rate of growth is suspicious and most likely measurably inflated.

For all the stock market investors out there, we are drawing no position on the state of the U.S stock market.  The market dropped so hard and fast when the Credession hit that it is hard to get hold on what the equilibrium value of the market should be.  This is probably true in China as well.  The important lesson is that one should be very careful making investment decisions based on the prevailing opinions that the U.S. economy is rebounding and the economy in China is still growing rapidly.  

We are seeing some bottoming in most CD interest rates with shorter term rates fluctuating modestly while the long term rates have actually some ground.  With the considerable market uncertainty we are experiencing, this is a time to shop the short term and mid term CD rates.  Most six month CD rates are unbearably low but there are pockets of investment opportunities in the one year CD rates and odd term CD rates between one and two year terms.  Shop and compare the national bank CD rates first but be sure to check the state bank CD rates as well since many of regional rates still outpace the national bank rates.

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