Whether it's gasoline or groceries, blaming traders because you happen not to care for a market's prices is like blaming the mailman because you don't like the mail. They are price messengers, not manipulators.
Those prices are critical for a productive economy. Regardless if it's corn, crude oil or shares of Citigroup (C),
It allows everyone -- regardless if they actually use the product itself -- to make better and more informed decisions, exactly why short term government efforts to boost (as in housing) or lower (as in energy) prices have a destructive effect. Once the stimulus is removed, prices revert to their actual (read: economic) value.
The same goes for the cost of money, that is, interest rates. Just like prices for energy or labor, interest rates aren't arbitrary, but reflect the reality of willing buyers and sellers in the marketplace.
For example, even after Greece's second $170 billion bailout and subsequent default/debt exchange earlier this month, the "new" 10-year bonds issued by the government have sunk once again, with yields now exceeding 20%. In effect, the market is judging Greece to be a more risky credit than its own finance ministers would like to believe. Sorry Philos, reality exists.
And despite our own government's efforts and explicit promise to keep interest rates low, they've been persistently trudging higher, prompting losses in bond mutual funds this year thus far. More ominously for those continuing to allocate money to the asset class is that some of the market's most notable securities are in danger of potentially breaching long term trends.
As we wrote last year, the 200-day moving average uses roughly a year's worth of trading data to provide a big-picture indicator of the market's longer term trend. Odds tend to favor those who follow the trend rather than fight it.
The shortest-maturity fund, iShares 1-3 Year Treasury Bond (SHY)
What makes prices important is that, when left to freely function, they reflect the objective reality of what the world thinks of XYZ: They're where the rubber meets the road. Sustained closes below the 200-day moving average for both TLT and IEF would further reinforce the notion the top for bonds is in.—Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC. At the time of writing, Hoenig's fund held positions in many of the securities mentioned.