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To: pater tenebrarum who wrote (58962)	1/17/2001 7:21:04 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 436258

Speaking of debt problems, MBI fesses up about their CaliUte exposure: 18:29 [MBI,EIX,PCG] MBIA SAYS MBIA-INSURED BONDHOLDERS CAN BE CONFIDENT OF REPAYMENT WHEN DUE 18:28 [MBI,EIX,PCG] MBIA INSURES $5M OF SOCAL EDISON'S NOTES, DUE 2006; $14M BONDS, DUE 2025 18:24 [MBI,EIX,PCG] MBIA SAYS IT HAS CLAIMS OF $660,000 DUE TO SOCAL EDISON'S MISSED DEBT INTEREST PAYMENT

To: pater tenebrarum who wrote (58962)	1/18/2001 7:54:27 AM
From: Oblomov	Read Replies (1) \| Respond to of 436258

Heinz, the fact that HH debt is 108% of disposable income means nothing per se. There is nothing special about the value of 100% in this case. Debt is a component of net worth, and so debt is properly compared to assets. The debt/asset ratio has not changed much in the past 20 years. And certainly the ability to repay is based not on income but on the HH's entire financial resources. Although equity values declined by about 10% overall last year, the average US HH does not have significant assets in the equity markets (<$50K). In fact, the median HH has less than 3K in the equity markets. The vast majority of HH asset values is contained in real estate. I, too, believe that deflation is the next phase of the credit cycle. In fact, we are probably already in it. Any attempt to reflate appears to stimulate asset prices rather than goods prices. If real estate prices are hit, then debt deflation is assured. But, not until then, IMO.