Some Common Sense About Interest Rates & Current Market Conditions

Rick Santelli, CNBC's Chicago reporter on the commodities and options markets there, has been in its New Jersey studios recently. What a breath of fresh air! I swear, this guy should be anchored there all the time.

I periodically castigate the network for focusing on the "action" on the floor of the NYSE, when the real decisions regarding equities are made in institutional money management offices across the country and globe. However, with fixed income, it's slightly different.

Bonds, particularly Treasuries, are a mathematical play. Pure and simple. In fact, one business partner of mine, my friend Bob, has opined that equities are the wild west, where any valuation can happen, without a clear cause. Fixed income, on the other hand, which is where Bob spent much of his productive career, are all math, and very understandable.

Santelli does a really wonderful job explaining the market forces at work while the camera shows the trading pits of Chicago in the background. Unlike, say, Bob Pisani, who looks up at some market stats board on the floor of the NYSE, then makes up his own story about why "the market" is doing something, Santelli calmly explains how the math of interest rates and inflation are pushing bond prices around, and affecting the term structure of the yield curve.

Thus, his remarks over the past few days have been calming, albeit delivered from a desk on CNBC's New Jersey set. He essentially said that a rise in rates from 5% to 5 1/2% was hardly enough to justify all the carnage recently seen as a result of inflation expectations. I think he is right. His calm explanation of the recent moves, and probably long term affects, seemed very reasoned and sensible.

Later that same day, CNBC had Gail Dudak, one-time frequent guest of the late Lou Rukeyser, on as an equity markets commentator. She made a number of clear and reasonable points as well. In particular, when asked if we are now seeing the beginning of a bear market, she said, "no." She likened these past few weeks to last Spring and October, when there were temporary market drops due to unfounded worries over various economic problems. I recall October's roiled markets clearly, as they came as a partial result of Katrina's then-uncertain effect on the US economy.

Overall, these two people, Santelli and Dudak, provided with clear, reasoned and believable analysis. Admittedly, it reinforced my own beliefs, but they had different perspectives, which was important.

I think that, once again, we are witnessing a market which is in the throes of misinterpretation of economic data by a lot of inept seat-warmers in the money management sector.