I'm not sure, how you can be so sure that inflation is not going to go up. The credit engine is revving at accelerating pace. The mortage refinancing is higher than october 2005!! The rate of introduction to new derivatives is accelerating the money being provided to refinancings!! The gasoline supplies NOW are BELOW last year levels (last year there was Katrina that brought gasoline levels way down - remember shortages?!!). I dont see demand fall off AT ALL but SUPPLY is FALLING!! How can that be price deflationary? Also, the CPDOs and newer derivatives are being introduced at a much faster rate - And because everyone wants to get into it, the risk premiums are evaporating right at the introduction time itself!! (i.e the scope for price appreciation are so minimal and pigmen are piling on it like crazy - just because the leverage is way higher to make that thin profit margin worthwhile!!)
Credit (refinance) growth:
usatoday.com
Residential mortgage refinancing surged to its fastest rate since October 2005, the MBA said. Refinancing accounted for 48% of all applications, the most since February 2005.
"Borrowers are proactively refinancing in advance of rate resets," he said Tuesday. "There's a high level of consumer awareness and astuteness."
The MBA's gauge of loan refinancing jumped 6.5% to 2,022.2, the group said, adding that its index of home purchases increased 2.7% to a four-month high of 412.9.
marketwatch.com
Crude-oil futures climbed above $59 a barrel Wednesday, gaining after a U.S. government report showed that distillate supplies have dropped nearly 17 million barrels in six weeks and that gasoline inventories are down more than 15 million barrels in five weeks.
Gasoline supplies are now 1% below the same time a year ago -- a reversal "after being well above for almost two months," according to Shankar.
Distillate supplies are now only 6% above last year's level, after being higher by "double-digits for much of the past three months," said Shankar.
bloomberg.com
The most innovative feature of a CPDO is its resemblance to a gambler at a casino, doubling up when bets go awry by shifting chips from the safety of the pile in front of him to the danger of the baize. When times are good and the CPDO is likely to meet its payment obligations to investors, market bets are reduced. When times are tough, wagers increase in an effort to boost the net asset value.
``This intuitively allows any negative performance to be cured by increasing the income from the risky asset to rebuild NAV,'' rating company Standard & Poor's said in a report published last week. ``This strategy could be also viewed as `chasing losses' when it is the risky asset performance that has led to the NAV decrease. |
