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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 (3175)	12/11/2003 8:31:37 AM
From: Wyätt Gwyön	Read Replies (3) \| Respond to of 110194

the bogus and false inflation rate (minus everything that's inflating) is only 2% i think the problem is that there's a lot of inflation in the inputs, but no pricing power in the outputs. the result of higher input prices without higher output prices (indeed, deflation in many output prices, as per WMT SKUs) is a decline in margins and profitability. the result of a decline in margins and profitability is weak hiring demand. the result of weak hiring demand is poor income growth. the result of poor income growth is a weak consumer, which as we know has been the overwhelming driver of the so-called recovery. the only thing that has allowed the consumer to continue driving the economy in spite of poor income growth is the housing bubble. and as we know, the housing bubble is utterly dependent on low interest rates at this time. a rise in interest rates will kill the housing bubble... which will kill the consumer... which will kill the economy. so i would submit that in this dilemma, where the Fed must negotiate a path between the Scylla of a weakening USD with attendant commodity inflation, and the Charybdis of a depression brought about by a rate hike-induced housing crash, the Fed will choose the "lesser of two evils". i.e., continued LOW interest rates... this line of thinking leads me to expect continued fear and loathing unto death for the USD.

To: russwinter who wrote (3175)	12/11/2003 10:20:53 AM
From: Silver Super Bull	Read Replies (1) \| Respond to of 110194

Russ, RE: "I submit real inflation is already much higher than 2%." I've been wondering what it really is, based on the fact that commodity prices and the stocks of raw materials/commodity companies has been surging. If interest rates remain low for the next few months, and this rate of inflation continues or increases, it could be a very interesting year in 2004. People seem to forget that stopping inflation, once it has taken hold, can be very difficult. DB

To: russwinter who wrote (3175)	12/11/2003 10:22:48 AM
From: Crimson Ghost	Respond to of 110194

Russ: I would add that to the extent higher rates boost the dollar and slow the global economy, the demand for Asian products will ease -- thus reducing pressure on commodity prices from Asian exporters.

To: russwinter who wrote (3175)	12/11/2003 12:09:40 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

1. to defend the USD You make an assumption that they WANT to defend the US $ I do not believe that is true at all. With foreigners holding all that debt, who cares if it goes worthless M

To: russwinter who wrote (3175)	12/11/2003 12:19:30 PM
From: yard_man	Read Replies (1) \| Respond to of 110194

>>1. to defend the USD 2. to at least provide a real rate of return for creditors.<< defending the dollar -- what foreigners do -- actually lowers rates -- they buy treasuries. Foreigners haven't cared about "real returns" from their investment in treasuries for some time now -- they do care about selling us stuff -- an orderly slide is in their self-interest. What are treasuries now anyway -- paper -- so are USDs ... so many talk like one is the absolute and the other floats with respect to that -- but both are floating ... As bad as this sounds - I think the fellow who talked about outstanding debt as a balance sheet item -- that it should be ignored -- and that we should look simply at "flows" is probably right ... If you are looking for a viscious selloff in treasuries you need to ask yourself what will be the trigger -- the fact is: foreigners have been willing for some time to endure negative real returns (and add to positions) -- if you simply look at dollars -- the USD has plummetted from 120 to 88 -- where's the so-called exodus -- when is it coming??