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To: Perspective who wrote (21262)	11/15/2001 10:49:25 AM
From: JRI	Read Replies (1) \| Respond to of 209892

Wow BC...that's a "POST OF THE YEAR" candidate....great opus.. And timely too (for me)...I've also been trying to reconcile (in a tight argument), how Fed can pump and pump, and how we do not see/will not consumer price inflation at some point/during next year. There is only one point to (re)consider, I think: Residential real estate a weird animal, because (1) Some areas of the country never really experienced a bubble (2) Demographics play a large role (3) Unlike stocks/bonds, residential real estate not bought w/underlying profit stream in mind;"shelter" component is most important. Certainly, some areas of the country will see residential real estate prices come way down....others, I'm not so sure. Commercial, of course, something else again. Again, thanks for that piece. Since you post so infrequently, do you somehow feel your infrequent posts must be longer? g

To: Perspective who wrote (21262)	11/15/2001 10:57:53 AM
From: jeffersonkeith	Respond to of 209892

Great post Bobcor! eom

To: Perspective who wrote (21262)	11/15/2001 11:50:39 AM
From: JRI	Read Replies (1) \| Respond to of 209892

OT OK, big picture man, gotta question for you (one that stumps me).. Was the technology-led productivity "miracle" of the late 90's: (A) A total lie/false (due to hedonic pricing, etc. WAY OVERSTATED) (B) Somewhat true, but somewhat overstated (C) Totally true, and perhaps leading to deflation I am leaning between A and B...mostly towards B...I see the benefits of technology of course (ie., better access to more information...free e-mail is something we all can understand as a good thing). But I wonder about a human's capacity to increase quality of decision-making by having MORE information in many cases. (Like: The old hedonic argument of how much more productive is having a P56 when you only need a P3)

To: Perspective who wrote (21262)	11/15/2001 12:04:33 PM
From: ru2	Read Replies (2) \| Respond to of 209892

Great post! I will be chewing on this one for a while. A few questions come to mind immeditately though. You say there is no pent up inflation risk and mention asset deflation. Do you mean that a person with just cash is going to retain roughly the same buying power over the next decade? Do you see the Dollar declining severely against the Euro or the Swiss Franc over the next decade? Has there ever been a period in history, in which a Goverment could dramatically increase the money supply and keep that money concentrated amongst as small a percentage of the population as has happened this time? If the awnser to the above is no, do you think one of the reasons that it has happened this time is in large part due to technology? The "New Era Economy" people were saying all the way to the top that everything was different this time because technology had changed the cost in production of goods. While we certainly have more kinds of products than before, what has struck me as much more "different this time" was the way technology concentrated control of those goods into the hands of fewer and fewer people. Maybe I'm wrong but it seems to me that Bill Gates has more control over my computer than Ford ever had over cars. Thanks for your thoughts R ########################################################### Going forward, it means there is no pent-up inflation risk. The inflation that is going to happen from the exploding money supply has already happened; it's just limited to asset inflation. Capacity and employment conditions will see to it that we see no commodity inflation, no wage inflation, and low interest rates for the forseeable future, potentially ten years or more. Future money supply increases will be increasingly limited to asset inflation, but with the value of the underlying corporations declining at rates comparable to the money supply increases, the absolute price level for equities may go either way. But here's the huge conclusion: when the money supply increases cease, there is another massive asset deflation looming. Keep an eye on that money supply; when the Fed runs out of pedal travel, the S&P will finally succumb to the gravity as we've all predicted.

To: Perspective who wrote (21262)	11/15/2001 12:53:59 PM
From: Berney	Respond to of 209892

BC, That is a powerful thesis!! Thanks for taking the time to share your revelation. It is certainly a possible hypothesis. I keep looking at the chart of the fourth quarter of '99, which was the last time the fed had the liquidity pump going at full throttle. Then, as now, I find myself as a deer in the headlights, as one knows that this is not going to end well; however, from what levels! You should go surfing more often. Berney

To: Perspective who wrote (21262)	11/15/2001 2:56:33 PM
From: Doppler	Read Replies (1) \| Respond to of 209892

Great post Bobcor. I have been saying the same things in multiple posts for years. It is nice to see it all crystalized in one well articulated post though. Congrats on a potential post of the year.

To: Perspective who wrote (21262)	11/15/2001 3:18:31 PM
From: Charles P. Hubbard	Respond to of 209892

Great post, you are now bookmarked here so I won't miss the next one.

To: Perspective who wrote (21262)	11/15/2001 3:40:22 PM
From: NOW	Read Replies (1) \| Respond to of 209892

all i want to know was: how were the waves? you get barrelled or what, bra?

To: Perspective who wrote (21262)	11/15/2001 4:09:09 PM
From: AllansAlias	Read Replies (3) \| Respond to of 209892

BC, your post is thought-provoking. Very nice. In general I agree with that you are saying, but I think you are significantly overestimating the effect. Concentration is skewing things, but not as much as you contend imo. Anyway, don't bother responding, I'll have more to say when I have time to give your post the time it deserves. Cheers

To: Perspective who wrote (21262)	11/15/2001 7:24:23 PM
From: NOW	Read Replies (1) \| Respond to of 209892

glad i didnt go long bonds on your #9 today...<g>

To: Perspective who wrote (21262)	11/15/2001 8:34:37 PM
From: russwinter	Read Replies (2) \| Respond to of 209892

A thoughtful theory, and one that I agree with up to a point. Where I differ is on commodity deflation going forward. No one can deny we are in it and have been for some time, however IMO we are witnessing the final liquidation phase of it. This also is tied to the financial asset bubble of the late 90's. The bubble created a sort of "wildcat capitalism" that massively misallocated capital into certain sectors (TNT: tech, internet, telecom) of the economy at the expense of what is commonly called (and at the height of the mania, derisively) the old economy. I define the old economy roughly as that which produces and uses raw materials and commodities. The last time the old economy had a real capital boom was 20-25 years ago. All strong periods since have been brief and not sustained. As a result, a great deal of the "seed corn" from that period has now been used up and fresh capital has been poorly supplied (I've called it the "slumlord analogy") to replace it. As an example, pull up a web site of any major offshore driller, and you will find an inventory of once very expensive equipment, and usually an in service date. The vast majority will indicate 1975-1982. This can be repeated all up and down the metals, energy, lumber, water, and agricultural complexes: used up equipment, mines, shipping, refineries, depleting deposits and fields (in energy, many state run), and operations that are not adequately replacing their capital or cover the cost of their capital (impossible at today's commodity prices). So now overlaid on this, we have a free fall in economic activity (from the deflating asset bubble) that is the final death knell to whole industries in the raw goods sector. Many were so capital starved and weak before this latest collapse in demand, that the end will come swiftly. In fact, if you follow mining it was happening BEFORE 911. Energy was given a brief reprieve from this with a vicious fakeout (caused in turn by worn links in the undercapitalized energy infrastructure) of last year. That must have done wonders to energy company corporate planning? Go out and aggressively develop (for all of about three quarters), and then get the rug pulled out. Will they do it again? Gun shyness will contribute even more to the emerging supply trap for commodities. Even if economic demand shrinks down to metabolic rates on the global level (unlikely in my view)we are still going to wake up in the midst (2002-2005) of shortage and supply shocks for any commodity that requires significant capital/reinvestment to explore for, mine, drill, transport or grow at any real level of complexity. Your apple tree in the backyard will do fine, but few survivors will be on hand to attack and redeploy to meet the real economic opportunities in commodities without a major crisis first. I viewed a TV program last night about the development of the Ertsberg and Grasberg copper/gold mine in New Guinea. A tremendous and complex effort was involved (again mostly in the early 80's) This can not and will not be replicated in this environment, or for a long time to come. Alea iacta est: the die is cast.

To: Perspective who wrote (21262)	11/17/2001 6:22:12 PM
From: sun-tzu	Read Replies (1) \| Respond to of 209892

bobcor, thank you for sharing your thoughts and the eloquence in which you state them. i agree with you in principle but do differ in certain areas. i too, have been early at times in my response to economic events. two things i have learned are that macro counter-events NEVER happen as fast as you think. also, NEVER underestimate the Fed's ability to overstimulate and overreact. that being said, i view your thoughts within the framework of a broader gestalt. i use the DJIA monthly dating back to 1920 with a 50 and 200 period moving average. if you extrapolate that chart, mean growth would target roughly 4800 as the point of sustainable, normalized expansion. this also coincides with the 200 month moving average of the chart. it also roughly coincides with a 62% of the Dow off the 1932 bottom. in addition, i think historical P/E's are pertinent here. the excess in asset valuations are fully represented here: decisionpoint.com needless to say, a regression to the mean MUST occur. and given the magnitude of disproportion, this is something that will take years to work off. conversely, a substantial crash could rapidly correct valuations, but i think that type of crash goes well beyond the imagination of even the most vociferous of bears. my point is simply that an appreciation of the time necessary to cause a macro trend to shift is needed. this perhaps will prevent us from jumping the gun too early. we have had 5 secular trends since 1920 and currently are in the beginning of the sixth major move. 1920-1929...bull market 1929-1949...bear market 1949-1965...bull market 1965-1982...bear market 1982-2000...bull market 2000-????...bear market personally, those that see a resumption of a macro-bull here make no sense to me. that basically negates the 18 month recent bear market as a cyclical process within a secular trend dating back to 1982. there really is no historical basis for a continuation of any macro bull here particularly given the monetary excess, asset bubble, consumer and corporate debt issues that overhang us. i think we, as bears, need to honor the timeframe that has been placed before us. with regards to the money supply, i have tried to understand how money LEAVES the economy since i too, am puzzled by the lack of appreciable inflation given the 4 trillion dollar expansion in M3. i agree 100% that money has been concentrated in the hands of the wealthy and your reasoning is as good as any i have seen. the only thing i would add is that the government itself is probably the primary entity responsible for monetary destruction. the conflicts, wars and subterfuge in recent history cost an awful lot of money. perhaps those on the CFZ and E threads with more of an economic back ground can expand or refute those statements. perhaps the overliquification is somewhat exaggerated; however, the overcapacity and debt load as they relate to natural cyclicality and historical mean growth are indisputable. we have years of downside action ahead of us in order to work off this massive, 20 year move to the upside. that being said, greenspan's printing press has always given us some parabolic liquidity based moves that have been sustained far longer than we have expected. his latest move following sept 11, is immense compared to his other follies of 1998 and Y2K1999. how long does this one last?

To: Perspective who wrote (21262)	11/17/2001 6:57:28 PM
From: John Madarasz	Respond to of 209892

Like the chill of autumn. This week President Bush demanded that > Congress pass his "economic stimulus" bill by the end of the month, The > New York Times reports. The bill would give $25 billion in federal > money directly to the nation's wealthiest corporations, including IBM, > GM and GE, refunding taxes they paid over the last 15 years. In all, > the bill will give $112 billion in tax breaks to the wealthiest > individuals and corporations over the next two years. csf.colorado.edu

To: Perspective who wrote (21262)	11/18/2001 1:08:18 PM
From: pmcw	Respond to of 209892

bobcor, Thank you for taking the time to write one of the more thought provoking posts I've read since I started surfing and posting the boards in early 1999. I think there are many points of merit in your post and would appreciate your helping me explore some to a greater depth. Being roughly 1500 miles from the nearest break, I'm not able to sort out my thoughts on a wave. However, I find a long cruise on my motorcycle down a twisted two lane often does the trick. In other words, I see the value of sorting out thoughts while involved in an activity that requires constant attention. However, I can't explain why. It's almost like the gold nuggets panned from a stream "automatically" falling to the bottom of the pan as the miner concentrates or ridding the mix of the parts undesired. I wrote pretty extensively during Q1 2000 about how I felt Greenspan was attacking asset inflation and that traditional inflation was no where to be seen. I feel he and other central bankers across the world were very scared by the value of a share of CSCO, AOL, and the plethora of dot.bombs. What if these hyped currencies (stock certificates) started buying companies with traditional (hard) assets? The purchase of TWX by AOL was a very scary thing for many in the economic world. Based on relative market cap's, at one time, priceline.com could have bought the top three airlines. However, my essays were from a different angle and didn't extrapolate the future as definitively as you have here. As a result, I want to go farther and find if we continue to converge or possibly diverge. However, I need to evaluate your forecasts a bit more before I respond to those points. To provide the intelligible response your posts deserves, I need some help in clarifying a few points. 1) Can you define wealthy as it is referenced in your essay? I've not tried to tack the asset inflation theory we both support to any particular group. However, since we did see product inflation at the "Gucci" level, your thesis, I feel, has merit. I'm just curious as to your demographic description of this group. 2) Do you know of any credible studies regarding US Wealth Distribution that include years 99, 00 and any of 01? The last one done by the Fed was from 1989 through 1998. I can't find any data between January 1999 and today. 3) My data points on M3 don't support it going from $4T to $8T. During these years, SA and NSA M3 are very similar so I'll just reference NSA. Jan95: $4.4T Jan96: $4.7T Jan99: $6.1T Jan01: $7.2T This data indicates the growth of M3 from Jan95 through Jan01 was only $2.8T. Please let me know if you feel these figures are in error. The source for my data is the following link: stls.frb.org Thanks for your time and consideration. Best Regards, pmcw