With the 10-year Treasury trading at 4.29% this morning, and the fed funds rate at 5.25% the Treasury yield curve is telling us that the Fed, Chairman Bernanke, and the FOMC is WAY (!) behind the curve in terms of reacting to economic data.
However before you panic and conclude economic Armageddon is just around the corner, this is the modus operandi of the Fed, if you study historical monetary policy changes: Chairman Greenspan didn't move until January 2001, well after the economy had turned down and the Nasdaq bubble burst, and even back in 1990 - 1991 around the time of the first Gulf War, Chairman Greenspan waited unto employment caved (and caved badly) before cutting the short-term rate.
The Fed waits until the data looks dire, and then they cut aggressively.
Goldman Sachs trading action is much improved: Goldman will report earnings next week for the quarter ended August 31, and the stock hasn't made a new low since August 16th. GS's trading action is much better than Lehman or Bear Stearns right now.
Goldman's trading action is telling us that - relative to the other white-shoe firms - their quarter should be less painful, and that the Fed will likely cut rates aggressively over the next few months.
Goldman is the bellwether of the investment banking firms: it's trading action of late is definite positive and we are edging back into the stock after selling our last bit at $204.
position in GS, LEH, index funds, Treasury bond funds, etc. etc.
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