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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: austrieconomist who wrote (183)	7/13/2003 3:23:24 PM
From: russwinter	Respond to of 110194

First, thank you for arriving here to add to the discourse. I'm going to address your points, and then veer off again, because I keep trying in my own way to pound home important points. <what is LS?> Dollar-based liquidity: defined as Fed assets plus foreign central bank government security purchases held by the Fed. The primary driver of the second component of that (foreign CB activity) is the massive US trade imbalance. A simple way to track LS is to follow trade deficits and the new govt securities sold to foreigners. You will note that LS appears to time gold moves fairly precisely and without lag, although gold has failed to find the bubble effect of some other markets. bcaresearch.com As I've said, I think that's institutional, as gold for most people is somewhat difficult (an outlier, if that's the correct term)to buy and store, and especially to sell. To me that's critical, as I feel capital flows will be THE key driver of gold prices (POG), even more so than generalized commodity and inflation/deflation trends. Don't know about most folks, but having a bag of gold coins in my safe or at the bank, doesn't interest me, but the new ETF will (may remove outlier?). Right now it would appear POG has some catching up to do, and perhaps the soon to be available (if the "authorities" don't kill this before it gets off the ground: see how cynical I've become about this looting operation) new ETF trading vehicle and the Chinese liberalization of gold ownership will be important catalysts to the move. At least I'm hopeful of that as a gold oriented investor. I don't have a clean chart of the CRB/LS like the one BCA provides on gold to show the commodities correlation, but a glance at the CRB over the last half decade appears to be somewhat like gold? moneycentral.msn.com <skepticism of the value of MZM inquiry> Don't know if I'm really skeptical, as actually you stimulated me to look closely at this as an indicator. I'm just suggesting LS may be superior? <No one directly places newly created money anywhere in particular.> I can understand that you may be wondering where the heck I'm going with this, but I'm looking primarily at the repo pool, which I see as hot "capital flow" money. I'm interested in pricing behavior and action in paper securities primarily, not so much commodities. THEN I'm looking at the feedback loop from that. If the real economy really needed these injections they would start working their way through the deposit and credit creation system. And as you pointed out in your post of monetary growth, apparently lately it is, although I'd like to hear more of your take? Message 19104564 But since the money is not really needed FOR USEFUL PURPOSES, it just gets used by financial institutions (speculators and Fed ramp agents)to fuel (the pump)the bond and mortgage bubble, which sets the prices to fleece (the dump)foreigners (specifically those who import to us) in the recycling operations. The feedback loop in the economy is the stimulation of even more overcapacity and activity in sectors like housing. It also creates a secondary bubble in maladjusted financial institutions, by swelling up and heroin fixing their portfolios and capital base. Of course there's hell to pay when the portfolios give it back up in a credit and bond market meltdown. On the housing point: I'm sitting in a development on the Oregon coast, where I would swear only 20% of the houses in my neighborhood are occupied at any point in time even in summer, and a bunch are for sale. By the way, I don't own the residence I'm using, so I'm very consistent with my philosophy. Even people who know how I think, wonder about that, and it shows just how ingrained this real estate bubble mentality is. It's weird of me to be renting, but my neighbors are sharp, prudent people for owning large expensive houses they don't use. Personally with my stash, I'd rather be shorting the financial institutions that are failing to enforce owner occupied clauses in such houses. But then like I said, I'm the peculiar one aren't I? My point is that there is too much easy money and liquidity around in an economy that really doesn't need credit for useful economic activities with returns. Owning empty houses, or renting properties at 3% cap rates in normal times would be considered insane. But in today's maladjusted world it's OK, at least for the moment. So naturally if the Fed is offering up nearly zero cost loans, by golly somebody is going to put it into some trending bubble (bonds and stock indexes) and distort the markets even more. That's why you see such nutty correlations and signals all the time: example Eurodollar deposits yielding LESS than T-Bills. When has that ever happened?

To: austrieconomist who wrote (183)	7/13/2003 7:20:25 PM
From: jjs_ynot	Read Replies (2) \| Respond to of 110194

Do you have a link to a site where a MZM quote can be obtained?

To: austrieconomist who wrote (183)	7/13/2003 9:17:22 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

For dollar based liquidity and to keep the semantic noise down, I will use the abbreviation DBL, as LS is a chart term, and I was confused by it's use on BCA's chart. But it (dollar based liquidity)was exactly the concept I was searching for on my hypothesis and theory, because it includes the USD recycle operation from massive trade imbalances (now running 5.3% of GDP) , which is the primary point I've been trying to get at for a month in our discussion. Duncan in his book amazon.com felt MG: global money supply was what mattered, and has a chart from the IMF yearbook. However, I haven't been able to find up to date MG figures anywhere.