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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: bmccra who wrote (1662)	10/26/2003 11:19:48 PM
From: mishedlo	Read Replies (1) of 110194

b - you did not ask me but I will butt my way in anyway. It should be obvious to all that Bush, Greenspan, et all misstimed this liquidity flood. IMO it peaked in June with the Bernake PUT and nearly caused a blowup in bonds. I would have guessed they wanted to stretch out these refis for at least another 6-9 months but they F*d up and we peaked in May/Jun with a throwover to July. That source of liquidity is simply gone. Now what? Now they will do every FN thing they can to prop up this pig of a market for another year but without housing refis it is going to be much harder. Right now they have seasonality in their favor, BUT foreign money can start exiting at any time. I would not put it past the foreign markets to time a "drain" just to hurt Bush re-election chances. Best time for that would be in say May of next year. Does that mean I think we hold together for another 6 months? Not sure at all. Honestly a yaer ago I thought I had all the answers. Now I realise I do not have any of them. But I probably do have better questions and a better understanding of what the tells might be. If junk bond spreads start to widen, if stocks and bonds start to both sell off hard, or if the US$ cracks hard (as in a plunge) the part could be all over. My guess is that junk spreads SLOWLY get worse, they prop up this pig in some kind of yearend or January rally, and somehow manage to rally the US $ and perhaps even knock down gold a bit (perhaps after making a new gold high). Plunge from 410 to 380 perhaps? All useless speculation. What is not useless are the indicators that say the part is over. Junk bond spreads, a market that does not rise much if they rally the US$, and/or simultaneous falling stocks and bonds (a clue foreigners simply have had too much US). The best way to prevent the latter is to "force up" a rally in the US$. That is perhaps why it will happen. M

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