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According to Bloomberg, the First Rate Cut of 2015 Occurred on January 1 by Uzbekistan.

According to Bloomberg the first rate cut of 2015 occurred on January 1 by Uzbekistan.  Since then, the cuts have come fast, with the People’s Bank of China (PBOC) on Saturday becoming the 17th central bank of the 57 monitored by Bloomberg to pare its benchmark.  Poland is expected to be number 18 by the end of the week.

Bloomberg writes Norway, Hungry and Thailand are expected to cut rates later this month followed by South Korea in April.

The US is expected to increase rates between June and September.

I guess it is safe to write that there is an undeclared global war to devalue one’s currency in an attempt to boost exports and make debt burdens more tolerable but at some juncture it becomes a zero sum game.

Moreover, to write the obvious all countries are attempting to export their goods to the US but at some point the rising dollar hurts American exports thus slowing the proverbial global locomotive.

How will these defacto devaluations and negative interest rates by 25% of the global central banks coupled by the massive impending ECB QE impact the global market place?

Currently a select group of equities are myopically focusing upon the perceived positive aspect of this action—massive global liquidity which is partially gravitating to the most capitalized issues.  But what happens when the proverbial party ends?

Treasuries were crushed yesterday as a second tier data point stated consumer purchases adjusted for inflation rose in January, a sign the plunge in gasoline prices in helping boost the biggest part of the US economy (and boosted import growth).

As stated many times, global central bank policy is attempting to force all further out on the risk curve but an argument can be made, the most “riskless” investment is now the most “risky” given the absolute low yields where any uptick will crush prices, the scenario that unfolded yesterday in the treasury market.

Was yesterday’s action in the treasury market be a harbinger of things to come?  Does this “harbinger” relate to the few mega cap issues that have boosted stock indices?  Some have suggested there appears to be a small manic bubble in the NASDAQ given its myopicy.

What will happen today?  The economic calendar is quiet.

Last night the foreign markets were down.  London was down 0.17%,  Paris down 0.10% and Frankfurt down 0.05%.  Japan was down 0-.06% Hang Sang Sang down 0.74%.

The Dow should open quietly lower.  The 10-year is off 4/32 to yield 2.10%.  Oil is about $1 barell.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.