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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: reaper who wrote (6564)	11/3/2002 11:42:05 PM
From: GraceZ	Read Replies (2) \| Respond to of 306849

Well your thoughts on the continuation of the bond rally are well known. While I was very happy to participate with some nice returns in bonds, I like to leave parties while everyone is still having a good time (continual source of friction between me and my husband since he likes to be the last to leave). With yields at a historical low, signs of both inflation and deflation (but with inflation clearly favored) in the economy I'd rather be wrong and out of the bond market then in it and wrong because the later is far more costly. As you point out I'm far from alone in this belief and this may be one of those rare situations where the consensus determines what ends up being right. I reserve the right to be wrong, I would just like to be wrong on the sidelines. Near term, I expect bonds to rise, if I didn't I wouldn't still be holding my positions. If a company is over leveraged with debt and the over-capitization you refer to is tied up in the capacity to make buggy whips there is no interest rate that is low enough for them to survive (and those companies who move those buggy whips around the country for them). The problem isn't that they have no access to credit now, the problem is that they had unjustified access to credit in the past. Giving them access to credit now resolves nothing. Some of them like LU need to restructure themselves into tiny entities in order to survive, the quicker they do it the better. Perhaps what you are calling a credit crunch and what I call a credit crunch are two different things. To me a credit crunch is an excess demand for funds that causes rates to rise even for good companies. What we have now is an excess of funds with a dearth of worthy borrowers. The companies who are credit worthy don't want to borrow and the ones who aren't worthy want to borrow but no one wants to lend without imposing a risk premium. So maybe it simply comes down to the two of us using the same term yet having different meanings and making entirely different conclusions as to whether or not cutting off companies who are bad credit risks is a negative or positive development. I find clearing excess to be a bullish development even while it can cause a great deal of short term pain.