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To: skinowski who wrote (77728)	7/21/2003 10:50:37 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 209892

<<The problem is, what if we inflate instead? That's the real question. I would get into the refi game myself as a hedge>> If we reflate meaningfully, real estate, gold, and debt rule. I secured a home equity line of credit in case I want to tap into more debt, but I'm not taking the risk of expanding my personal balance sheet in any other way until we see which way it breaks. The real estate debt situation is so dire that it's reversal could be a true financial black hole, sucking in all available liquidity. If so, it'll make the 30's seem like the 70's.....<NG>

To: skinowski who wrote (77728)	7/22/2003 11:24:13 AM
From: Perspective	Read Replies (2) \| Respond to of 209892

< I would get into the refi game myself as a hedge - if I knew where to put the money. Gold maybe? Ideally, it should be anything which would be trending my way - and denominated in something inflation-proof... but I am not sure I am good enough to come out a winner in such a complicated game. > I've been pondering this question long and hard. The #1 most important thing to remember is this: Unless the Fed goes to extraordinary unconventional measures, the natural market response will dominate and we will ultimately deflate here. The market will do what it has to do unless the Fed intervenes with extraordinary measures. The debt-deflation dynamic is too strong to be fought by merely lowering rates. And despite all the jabber about unconventional measures, as far as we know the Fed hasn't actually implemented any of them. So deflation rules. The reflation theme produced this immense rally over the past year, but the economic future looks as good as it possibly can right now, with the impact of the last refis, the topping of real estate pricing on an inflation-adjusted basis, and the tax cuts. If they do resort to unconventional measures then we can discuss the type of inflation that will result. It will be skewed heavily toward commodities, gold, and other low capital intensity items (things where there isn't excess capacity, or where excess capacity has little impact on pricing), as well as things with very inelastic supply/demand characteristics. Also, pricing power will go to items that are not typically financed, as things purchased with credit run smack into the debt-deflation headwind. (Remind me I said this every now and then - sometimes I forget to follow my own advice. <ng>) BC

To: skinowski who wrote (77728)	7/22/2003 11:30:57 AM
From: Perspective	Respond to of 209892

Regarding the Bernanke Put: it i, as far as I can tell,mostly hot air. The Fed is not in the business of losing money. It is a federally-chartered corporation with the exclusive right to print money, with rules on what it can do with that money. To subsidize the long-end of the curve would mean taking a massive loss to unwind the position, something they are not in the business of doing. They are fine buying a portfolio of short-term government debt and collecting the interest, but they don't want to get stuck with lots of underwater long-term bonds. One could see them getting into the commodity business, though. They would love nothing more than to start accumulating gold again, jam the price up, and then liquidate it into the inflation they create. It's all about the Fed producing shifts in pricing that result in increased concentration of wealth in their hands. The Fed will sit on its hands now and wait for the asset markets to bleed back to last years' lows before moving again. If they move strongly enough then, it will produce a brother up wave impulse "C" to the past year's up wave. If they respond weakly, it'll end up being a "2" in fresh down. BC