The Epic American Credit and Bond Bubble Laboratory Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Jack of All Trades who wrote (74290)	11/17/2006 1:35:48 PM
From: SouthFloridaGuy	Read Replies (2) of 110194

Is the Printed Circuit industry a better proxy? The reason why I am confident of a soft-landing is that thus far, unlike the 1970's, global liquidity has not been matched by inflation and higher nominal interest rates. High levels of global liquidity coupled with low interest rates stimulate investment, both real and financial, both good and bad, until opportunities are exhausted. This has happened in residential real-estate which in many areas went to valuations that were not justifiable at even these low rates, but this decade has seen relatively weak business spending. Business spending is worth 2x of residential. The lack of business spending is a result of the capacity overhang from the 1990's which appears to be worked off. Theoretically a "recession" can occur by housing investment alone, but business spending is strong enough to mitigate that because current financing rates are still low enough to create an abundance of positive NPV opportunities. The Fed is correct. The greater risk right now is that inflation hasn't been killed. Inflation expectations remain above 2% (from a high of 2.7%) despite the paltry GDP growth. In the last recession, these same expectations came crashing and were foreshadowing deflationary presssures as early as July 2000. So far no evidence whatsoever that this cycle is remotely similar. If those expectations fall below 2%, the Fed will cut and you can bet the stock market will go vertical. This is a win win situation for the bulls unless by some occurence, earnings collapse like they did in the early 90's or 2000, which by the way was just as much a function of leverage as it was falling demand (the corporate leverage component is all but gone now).

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next