>1) Futures on US treasury bonds are going to fall, as the DOT unloads 42 million of them. This is a lot, and it will affect the value of your investments/401k in a non-trivial way.

I think its important to note that the Fed is not going to start selling their holdings, they are going to stop reinvesting the proceeds as much (they haven't bought any additional assets since 2014, reinvestment aside). This should have a much more muted effect on the market -- letting a ~1%/month of bond assets mature without reinvestment is not the same as selling 1%/month.

>4) Foreign interests will have a "fire sale" of US debt available to them for purchase.

Again, the Fed isn't selling anything. They are partially curtailing demand by reducing reinvestment which will likely affect bond prices and yields, but not nearly as dramatically as selling them pre-term.

I'm not saying you're wrong, but if this is all that predictable... wouldn't the market already expect and reacted to this to some extent?

Also wouldn't it be pretty easy to make some money off of these oh so sure events?

In fairness I'm always wondering this when folks predict such things.

What he said was correct, its more a comment on the fundamental relationships than a prediction. The only thing that is priced in is the expectation of what is going to happen. No one knew for sure what the FED would do or when.

Your point two is not absolutely correct. Falling bond yields do not inherently cause a rise in stock process "simply because of their inverse relationship." For one thing, this could further depress the value of the dollar and drove capital away from the US, hurting bonds and equities alike.

Equities are currently inflated by cheap and accessible debt alongside a low expected yield. Id say unwinding is more likely to bring a reverse in equity pricing. Reasonable odds of a sharp one.

And why point 3? Is this from expected currency devaluation?

Is the Treasury Department selling the bonds or is the Federal Reserve?

Wasn't the action being taken in the article simply a cap on the amount of reinvested bonds? Doesn't that lead to a gradual decrease in purchases of mature bonds rather than a "fire sale"?

I'm not challenging your position, I am just seeing a terminology mismatch between your comment and the content of the article. I, a financial layperson, am likely not the intended audience of the article, which appears to be targeted toward economists or otherwise well-informed readers.

Can equities continue to rise in price? They already seem overpriced at current P/E valuations, disconnected from fundamentals.

Every time I find myself thinking "these are too high...", that's when my short stops start getting hit. When we talk about the equity indices at work, we have been referring to them as "defying reality" for the last 6 months.

Just my 2 cents, but I think they are a huge bubble, and at some point they've got to pop. I wish I had the equity for a very-long-term short, but unfortunately I don't.

Run a barbell strategy with short-term bonds and equity put options (slightly OTM). The convexity helps you out here - you're far more exposed to downward price movements than upwards.

Unfortunately, "the market can remain irrational longer than you can remain solvent"

Any thoughts on the impact to housing, and particular the Bay Area's crazy market?

> Commodities(such as oil, gasoline, natural gas) will increase in price.

How so? QE was heralded by critics as printing new money, leading to a price boost in equities and commodities since the money had to go somewhere in search of yield.

Wouldn't the opposite of QE decrease the supply of readily available USD, so the suppliers with a glut of a certain commodity are then forced to compete for whatever cash is left?

That logic doesn't hold. Look at the relationship between bonds and equities. You're saying that in "1) futures on bonds will fall.." which will cause "2) equities to rise" - well, historically yields have moved inversely to stocks but that hasnt always been the case - see http://www.marketwatch.com/story/the-disconnect-between-stoc...

All else being equal, rates going up will increase the value of the US dollar. If most US companies derive a majority of their revenue overseas, will that be good for US equities? And that's just one consideration. Point is,from a trading perspective, it's generally not helpful to make blanket assumptions as the market can stay irrational far longer than most think.

Does it make sense that equities would fall? It seems to me that interest rates on bonds should rise as the Fed adds to the supply of bonds, which should cause less investment in equities as bonds become more attractive.

Will this affect only US govt bonds or corporate bonds too?

Corporate bond yield is correlated to treasury bond yields, so the answer yes that it will affect corporate bonds as well.

Is it possible that bonds and equities both lose value?

Yes, esp since over the last decade we saw a bull market in both bonds and equities, where the equity market was arguably driven by loose monetary policy.

If the equity markets were buoyed significantly by policy, then unwinding this would have the inverse effect.

You could maybe see the fed funds rate rising through the early naughties, followed by the Great Recession, as an example of that.

You mean 42 trillion?

The bonds I'm talking about are(mainly) 30yr and 30yr ultra bonds, they have a face value of 100k. The other bonds will be in the mix also, but the lion share will(IMO) be 100k.

A disclaimer to all this... this is what I observe day in and day out trading bonds for a living. It doesn't mean that's what is going to happen, this is just what I've seen in the past.

Im assuming these bonds are in $10k amounts.

Edit: I looked it up and T-Bonds start at $1k

Long gold and silver!