FORTUNE -- Ben Bernanke is missing the recovery.
That's the view of Blackrock strategist Rick Rieder. In an interview with the Financial Times, Rieder, who is officially Blackrock's chief investment officer for fixed income, fundamental portfolios, said it's time for the Federal Reserve to scale back, by half, its efforts to stimulate the economy. He called the Fed's tactics a "large and dull hammer," that is distorting markets.
As such, the FT says Rieder's comments add Blackrock to the growing list of "Fed critics" who are worried about a bond bubble.
Perhaps, but it's important to note why. Unlike others, Blackrock's strategist doesn't believe the Fed's bond buying efforts are failing and will cause the dollar to plunge in value, taking the economy with it. (Buy Gold!) Instead, the reason Blackrock is nervous about the bond market is because the efforts to boost the economy -- by the Fed and others -- along with a more positive business cycle appear to be producing results. More than the Fed thinks. (Buy stocks, I guess.)
In a recent note to clients, Rieder pointed out three reasons why he thought the economy was stronger than it appeared:
All told, Rieder says, citing research firm ISI, the economy could grow 3.3% in 2013. That's better than the Fed's own forecast, which puts the range of economic growth between 2.3% and 2.8%. Once the market realizes this, Rieder believes interest rates will rise and bond prices will fall.
Here's the problem: Most of Rieder's points have recently been debunked. The New York Times's, Nelson Schwartz recently wrote that the drop in energy prices has yet to stem the flow of manufacturing jobs out of the country. As for housing, a 2% contribution to GDP might sound good. But economist Dean Baker points out that's still way down from the 6% that housing used to kick in a few years ago. Baker says Wall Street remains too bullish about the the job market.
Lastly, the evidence that companies are about to spend all that cash they have been hoarding through the recession is mixed at best. Indeed, many people think much of that money because of tax reasons may be stuck overseas.
But the biggest problem with Rieder's bond bubble thesis is this: Interest rates and the economy are only marginally connected. Rates have generally fallen over the past three decades, despite some rather robust periods of growth.
It's not that I don't believe interest rates will eventually rise, and that when they do a number of investors will be caught off guard. Still, with all the talk about the bond bubble recently, some cold water might be in order.
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Bank of America's hedging strategies are "nothing fancy."
FORTUNE -- There is no Charlotte Whale.
Ever since JPMorgan Chase (JPM) announced in early May that it had lost at least $2 billion in what was supposed to be the bank's hedging operations, investors have been scouring other banks to see if they have trades that could produce similar blow ups. On Wednesday, Bank of America (BAC) CEO Brian Moynihan told a group MOREStephen Gandel, senior editor - May 30, 2012 1:01 PM ET
The economy is getting back on track, so maybe it's time for policy makers to loosen their grip on interest rates.
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