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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: octavian who wrote (42574)2/9/2009 12:26:52 AM
From: Skeeter Bug  Read Replies (1) of 42834
 
octavian, i think we are in the starting throws of a depression. unemployment in CA is 16% (before they take out all th eunemployed they can and make the number look smaller). and growing. very fast. even accelerating.

TBT's success is based on simple math. the demand for money will increase dramatically over the next year or two. we are toalking something along the lines of $3.5 trillion over the next 12-15 months. they borrow or they print. tax revenues are collapsing. the banks are insolvent. some estimate another $1.5 trillion will be required to get them solvent - and that assumes there are no more "big bads." i believe there are more "big bads." commercial real estate is on the way to popping. the leverage in commercial is large. i also believe CA housing has another 30-40% to fall from current values.

that's both big and bad.

massively increased demand for money will require a higher cost for money in the form of higher interest rates. higher rates mean lower bond prices. lower bond prices means TBT goes up about 2x.

if that is all wrong, rates will also go up if stocks recover as people take their money out of bonds and put the money to work in stocks. higher rates will have to be offered to entice them back into bonds.

stagflation is definitely on the table as a possible outcome here. it isn't the only reasonable scenario, though. even if it occurs, the timing of it will be difficult.
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