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

To: GraceZ who wrote (6566)	11/4/2002 9:47:59 AM
From: reaper	Respond to of 306849

Grace, yes it does sound like we fundamentally agree, except (as you note) as to the resolution of the problem. an excess of funds with a dearth of worthy credits is the primary ingredient for rates to go lower. no, it won't help, but that's not the point; lower market-clearing prices for aluminum isn't helping Alcoa and Alcan either; it just is. i think you under-estimate the secondary and tertiary effects of denying credit to zombie companies like LU, F, S et al (and zombie sub-prime consumer borrowers, for that matter). these companies (and consumers) do not exist in a vaccum, so we can't just say shrink KMart from their original 2114 stores to under 1000 (where they will end up IMO) and say 'cool, now we have the market-clearing number of KMarts, and everything is fine' without worrying about the effects on the supplier and customer base, the employees, etc. i'm not saying that we SHOULDN'T deny these companies credit (of course we should); i'm just saying the repurcussions of doing so are not going to be smooth. i am sort-of with you on the bond thing. even though i expect the rally to continue, it's pretty well documented here that i had exited 60% of my bond holdings as of several weeks ago, though i bought 20% back when the ten-year got to 4.15. at the end of the day i'm pretty much thinking i want to watch EVERYTHING (stocks, bonds, real estate, commodities) from the sidelines at this point. liquidity is IMO paramount in what i expect to be a long, grinding deflationary bear, and i intend to stay that way. good luck and thanks for your excellent points. Cheers