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

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To: russwinter who wrote (12525)	4/24/2004 7:36:17 AM
From: Wyätt Gwyön	Read Replies (5) of 110194

what do you think of this guy (Raj Gupta's) theory of coming China bust and commodities blowout, resulting in gains for fixed income? Q: So what are the implications of a China fadeout? A: If China fades, then the industrial cycle globally -- the inventory cycle -- accelerates on the downside. It will have a very negative impact on Asian stock markets because there is a big China premium built into all the Asian stock markets. It will have a very negative impact on Hong Kong. The extremely inflated prices for commodities will go down very substantially. It will be quite helpful in removing some of the fears of inflation that are dominant right now in the fixed-income markets of the G-3 countries. Q: You aren't worried about inflation in this country? A: Now that the economy seems to be behaving in a fairly normal fashion, it is not unreasonable to expect the core CPI [consumer-price index] to also be at a normal level. That it was so far below normal levels earlier this year was probably unsustainable given the fact that the economy was returning to a more normal path. The core CPI was stuck around 2% to 2½% for quite a while in the late 'Nineties and the early part of 2000. It has risen from 1.1% to 1.6%, so it is on its path to normalcy. Central banks are extremely focused on the CPI, which barely budges. The place to focus on is asset prices, not consumer prices. online.wsj.com given that his main recommendation is 30yr USTs, i have to guess that his portfolio has been hurting big time the past month.

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