Well, the Federal Reserve cut rates, 1/2%, on January 30, and the bond market didn't like it.  Global buyers of US Treasuries and mortgage-backed securities believe that Bernanke is placating a "spoiled nation of sub-prime borrowers" and intend to hammer the dollar because of it.  

Here's why they're wrong:

1- The dollar, battered as it is, still represents the strongest currency in the world.  Now I fully expect to take heat for this.  The strength of the dollar comes from our moral initiative and ability to further that moral initiative (with 5-inch guns on a warship).  In short, I'm saying that the United States is the only country with the courage to deal with terrorists and that moral courage will be rewarded, long-term.  When the dung hits the blades, the world buys dollar-denominated securities.

 

2- Mortgage problems stem from a real estate valuation problem.  Cheap money hyper-inflated values in the most desirable locations in the country and now those values are dropping.  What goes up, must come down...BUT...it goes back up again.  Don't count out the long-term prospects of California, Arizona, Nevada, and Florida.  Teenagers in Buffalo long to live in Miami.  Princeton undergrads yearn to work in Silicon Valley.  Displaced auto workers find paradise in Phoenix.  As long as people want to live in these areas (and they do), there will be an upward push on housing values...long term. 

Why the low rates?  Well, my bias stems from the fact that I live in the eye of the cyclone continued