The Epic American Credit and Bond Bubble Laboratory Message Board

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

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To: Nibbler who wrote (76921)	1/1/2007 1:36:04 PM
From: John Vosilla	Read Replies (2) of 110194

'Somehow I don't think anyone here has yet figured out precisely how the bubble is going to play out.' You must watch Donald Trump on CNBC half hour special about High Net Worth individuals. More than once he put the fate of the housing bubble really bursting on Ben Bernake keeping interest rates low. No mention of inflationary pressures, current account deficits or the long end of the curve which Bernake can't control. I don't know what Trump was trying to pull since everyone in commercial RE knows how critical the 10 year treasury is to setting cap rates for properties and thus the valuations.. Seems he has gotten very arrogant thinking he is now above the basics fundamentals of finance and economics.. The biggest risk IMHO these days is the global attempt at currency debasement backfires and creates an event resulting in a huge backup in long term rates in the USA in rapid fashion. Many like myself feel that inflation is much higher than reported and long term rates should be 200-250 basis points higher which would send many stretched asset values down 30-35% based on multiples to cash flow.. With real interest rates remaining negative as well you would have a ton of bagholders with incredible losses should this take place both in shrinking equity for owners and cramdowns of debt by the holders of that debt that end up becoming the new owners. The housing bubble in and of itself is a sideshow in the big picture and if the bust isn't taking Florida down (the most housing centric state of all yet only 3% unemployment) for the count then the nation isn't either with only a slowdown taking 2% off GDP as the overall pain.. We need much higher rates and tighter credit to see who was really swimming in the pool naked once they empty it.. I always look forward to coming here and seeing what GST has to say. It is nice to hear a perspective from someone with different experiences than myself that also seen a lot and has helped me fill in the blanks. The fact your prior post got six recommendations shows how desperate some are in needing to be right on their fading hope for a 1929 repeat that will save their cash hoardings or short positions.. The last things some people want to hear is the stock market is going up for real fundamental reasons or they'll actually need to get out into the real world and make their money work for them. Any folks talking about us currently being in recession with deflation, extreme overcapacity (except select housing submarkets) and no good paying jobs really need to get off the computer and out of that tent in flyover country.. These very low rates, strength of our financial institutions to continue lending and continued ability of our federal government to monetize the back end with no repurcussions are the story. Until that dynamic changes expect a continued rise in cost of living, decent economic conditions for most and as always a new set of winners and losers in the game..

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