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

To: russwinter who wrote (2174)	11/15/2003 1:57:34 PM
From: ild	Read Replies (2) \| Respond to of 110194

IMHO 1. We are going towards deflation which is going to be much worse than what Japan has been having. US has much higher levels of debt, so bad debt deflation is upon us. 2. Greenspan will never raise interest rates. Someone else, who will come after him, will. I don't know when. 3. Credit will cease to be easily available regardless of interest rates because of high risks in falling asset prices environment. Am I too bearish? EDIT: I think giant USD carry trade is in its infancy. Very few people in the world do not trust USD. For instance most third world people hold their savings in USD.

To: russwinter who wrote (2174)	11/15/2003 4:35:27 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

How long do US short rates stay at 1.0%, so as to allow them to do this, unfettered? That's the 64k question? Call me nuts but it is 50-50 that the next REAL move is DOWN, not up. Perhaps a hike of 1/4 or 1/4 then another 1/4. If it goes beyond that at all I will be fabbergasted. After that it is DOWN DOWN DOWN DOWN. from 1.5 to .5 Housing is going to go to hell on hikes. You know it, I know it, and Greenspan knows it. Hikes will kill jobs (not that we have many anyway), hikes will increase bankruptcies and you know that as well. That entire last paragraph is DEFLATIONARY not inflationary. Look, I know the "inflation case". I just bet we get the worst of both worlds for quite some time until the whole thing blows up in shit. It will ONLY be AFTER we have a deflationary crash, wiping out all this mammoth debt that these hyper-inflation fears will be seen. Best bet is for stagflation (and a severe one at that) to continue. All the "inflationists" are really giving greenspan credit for being able to inflate our way out of this debt. Think about that last sentence. Do you think .... 1) Greenspan can inflate our way out of this mess? 2) Are bankruptcies and housing crashes, and stock crashes, and bond crashes that everyone here (including me) are calling for, inflationay or deflationary? I think the answer to those two questions is glaring obvious. No and Deflationary are the correct and obvious answers regardless of the price of beef, corn, gold, oil or whatever is going on in the meantime. Also obvious: The bond market does not believe this GDP, neither do you, and neither do I. If that tails off or sinks is Greenspan going to raise rates? Hell no. Actually I am happy that no one here or anywhere else sees this. Everyone is worrying about "inflation" right now. A deflationary crash is what people should really be worried about. All this stimulus, loose money, etc etc etc is setting us up for the biggest bond bubble bust, housing bust, stock market bust in history. All of those are deflationary. Raising interst rates will accelerate the move towards it, not stop it (wouldn't you agree). Please address that last question: All of those are deflationary, are they not? Raising interst rates will accelerate the move towards it, not stop it (wouldn't you agree?). Would or would not an interest rate hike(s) accelerate a huge slowdown in housing? Just who benefits from a rate hike? Someone please answer that question. What is the cost to stop this perceived inflation? If the cost is too high, if you were Greenspan right now, would you hike or pray for a miracle? Seriously, I think you would pray for a miracle. Now, you or I would not be in this moron's shoes in the first place, but that is not the point. What would happen if you raised rates right now? What would that do to hiring, housing, profits, all that debt that has not been rolled over, corporate profits, etc etc etc etc etc etc? That is why interest rates are not going up and in all honesty it would not surprise me at all if the next move was DOWN! Let's address one more point. Just cause interest rates are low, does NOT mean the banks will be willing to lend it at that rate. Look at Japan. They have zero interest rates and no one wants to borrow. Outside of housing, who is borrowing here? NO ONE. Companies do not want to borrow and certainly do not need to as they do not need capex anyway. Over capacity is also deflationary. Those that may want to borrow, probaly do not have good enough credit. Now, what happens IF housing slows. How many trades people will be out of work? How deflationary is the layoff of mammoth numbers of tradesmen? What will that do to housing prices. Once again, do you hike rates in the face of that or pray for a miracle? Now, housing is probaly going to die on its own accord and it has lasted far longer than anyone thought but do you want to speed up the process by hiking rates 1%, 1/2%, even 1/4%? Those that still argue that rates are headed up answer all these questions please. Note: after all my bitching and moaning it seems that some STILL do NOT understand the difference between FED fund rates, and rates on TBILLS. Greenspan is in control of the former and the market is in control of the latter. As soon as China chokes on enough TBILLs those rates are gonna explode up, but betting that is NOW (before all the US idiots get scared out of the stock market into TBILLs) is probably dead wrong. Mish