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Strategies & Market Trends : Natural Resource Stocks

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To: Jim Willie CB who wrote (1588)	10/8/2003 9:21:10 AM
From: yard_man	Read Replies (1) of 108709

just a couple of things -- some are calling for a dollar crash and I never meant to imply that you were -- I was simply saying that given the circumstance now -- huge foreign ownership of USD assets -- a smaller shift now, i.e. 120 --> 91.XX is more of a BIG DEAL than a same % drop in prior "cycles." I don't doubt what you say -- that the banking and government folks have no guts to allow BKs and they will paper over them like mad, but doesn't this require said banks to hedge the additional borrowing by owning more treasuries -- also as real returns on stocks and other "mainstream" investments such as real estate head to zero -- won't even more folks shift money to treasuries ... You've got the credit supply thing pegged, but I am not sure about demand. At some pt corporations and individuals will start repairing their balance sheets regardless of what the spin-masters say -- this will have to reduce demand for the growth in private debt. It seems to me the wildcard is the government -- just how crazy will they go on fiscal madness. Surely that isn't irrelevant to what will happen to bonds. Let's say your slow grind down in the USD is correct -- that would imply just a continuing leakage at the margin for foreign ownership of our ever-increasing treasury debt?? Now as to price inflation -- you seem to assert that the debt bubble will never burst -- how is it then that prices of homes will decline in value?? If they do decline in value then the bubble is going to burst because it is built upon ever-expanding prices and it is a large part of the debt bubble -- if it does burst, that is going to be a powerful deflationary force -- because it will certainly curtail household spending -- put that reduction in demand against very low levels of capacity utilization and some prices are going to fall. No, I am not saying the price of commodity inputs will necessarily fall -- because I believe there has been underinvestment there, but some price will fall.

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