<font color=red>EXTRA GOLDEN DOG POOP</font>
economic news is accelerating on the downer side
this is the most complete pervasive erosion I have ever seen
every sector faltering, with banks leading the way to oblivion
but then again, I have described the Vicious Cycle all spring long
dollar decline dictates the entire downward cycle
some believe the dollar will turn down only after reaching 111
we will see
Sinclair seems to think the focus is on TrezBond yields bottoming
with SSMorgo releasing controls of dollar/bonds/gold
in a recovery, banks lead the service sector
and semiconductors lead the technology sector
both are going to hell fast
all the earmarks of crushed gonads
if the recession worsens, gold will do very well
as bonds top out and rates bottom, dictated by foreigners
then we move to stagflation, as debt levels are way too high
if recession tinkers but never takes hold, gold will do extremely well
as stagflation takes root, prices rise within commodities
"if perfect storm hits, as I expect it will, gold will skyrocket
as stocks go to hell, bonds are a deadend, and panic haven gold is sought by the entire world
then we attempt desperately to find a path to stagflation
with no assurance of success
probably end up with some sick NEW WORLD ORDER"
AND:
"notes from Pimco's Gross on CNBC interview
he talked about deflation and bond bubble
he expects some more bond rallying, lower TENS yield
he does not see evidence of a bond bubble yet
deflation is the more probable outcome in the US economy
simply too much debt, which is in trouble, widely liquidated
China and India are exporting large quantities of products
we have a very fragile global banking system now
US Banks are fragile, showing serious threat of derivative risk
mutual funds are subject now to "snowballing" sales
two criteria necessary for bonds to be in a BUBBLE:
1. strong price appreciation
2. unreasonable expectations as basis for investments in it
he sees the price apprecation
he claims bonds now are expecting "melancholy economic environment"
he does not see expectations out of line, given the worsening deflation spreading thru the economy
I have two central questions for Gross in respectful dispute:
1. at what point does this massively indebted nation fail to offer sufficient RISK PREMIUM to foreign investors on TrezBonds?
2. to what extent is the absurd Mortgage Backed Security expansion feeding the TrezBond market wrongly?
me on 1:
the inevitable bottoming and even tepid recovery of Reflation prevailing over Deflation dictates a necessary "risk premium floor" for foreign investors, which is only amplified by the pathetic and worsening USdollar fundamentals (trade gap, fed deficit)
the floor is not 2%, and imho not 3%, probably closer to 3.5%
me on 2:
the laxity in mortgage business now borders on criminal fraud, as income pct minimums are now near 50%, income is hardly even verified, appraisals are forced if not intimidated, giving the whole mortgage finance the smell of shit fraud, which is passed on as MBS bonds, thus leading FannyMae to protect itself from further REFI's with further TrezBond hedges
I dont think Gross addressed the MortBackeds and their influence in producing a bubble
perhaps the false expectation is that MBS hedging will continue forever
this undermines Gross's thesis
note on Art Cashin today:
a false disparity showed itself between S&P cash market and S&P futures by midmorning
this produced a false rally off the midmorning floor
it was a glitch, thus the rally from Dow+200 eased
he also sees a big gold opportunity, BUT ONLY when the USGovt begins to inflate
so far only the FedReserve thru the bank system is inflating
when the govt follows suit, time to get into GOLD
a big point, a subtle point, but most excellent
govt participation comes in several possible forms:
- tax refunds again
- "helicopter drops" in each household
- extensive public projects (e.g. 1930 TVA electrification)
- big corporate tax forgiveness on temporary basis" |
