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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (4363)1/4/2004 5:01:59 PM
From: yard_man  Read Replies (1) of 110194
 
re CI -- I agree with the excerpt below from CI -- watch the trade deficit, i.e. consumers propensity to take on debt -- rates will rise when we can least afford it from a timing pt of view.

Now, if the USD is going down vs other currencies -- isn't this correct: it is not necessary for the deficit to contract in nominal terms, it just needs to contract in real terms to signal trouble ahead??

>>As crazy as this may sound, if our trade deficit were truly to contract meaningfully ahead, we would expect foreign flows of capital into the US to likewise contract, clearly pressuring US fixed income prices. But we're not there yet. Certainly the foreign community could also decide to place their capital elsewhere in the global sphere, but foreign purchasing of US financial assets has much less to do with investing than with promoting and sustaining their export driven economies. <<
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