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

To: eddieww who wrote (3690)	12/20/2003 8:50:17 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

Once having concluded the form of the correction, very different asset classes recommend themselves, don't they? Not necessarily (at least in the beginning, as in right now for a year or more). Clearly we have a ton of debt that needs to be either inflated away, or will go bust in a deflationary crash. case 1) Greenspan attempts to inflate it away, as he has been doing for over 2 years. Current progress sucks as there is no inflation in anything other than commodities, taxes, fees, etc. No pricing power in finished goods and no wage infaltion and no jobs. Thus interest rates will continue to remain lows as long as he is fighting this battle Case 2) deflation kicks in and to fight it, once again Greenspan keeps rates low, perhaps even lowering rates. I believe in fact he will be lowering rates at some point and that sure is in contrast to this board's beliefs. But compare the two classes, in both cases surprise surprise.... because "for a considerable period" interest rates must stay low. Thus EURODOLLARS. Now, what other classes will do well. If inflation succeeds, will energy do well. Yes it should. As a hard asset, should oil do well if deflation kicks in? Yes it should. Should is the operative word as there is no certainty. Will China still need commodities even IF deflation takes hold? Perhaps. Why can't China achieve critical mass for its recovery or at least stability but we go to hell in a handbasket here? I do not have high odds on that but it does seem possible, and the answer depends on how long Greenspan can keep the status quoa. From here, I do not see how in any scenario (for the immediate future, next 1.5 years, that interst rates are headed up substantially, if indded at all) Buy Eurodollar futures is the answer IMO. Ultimately, if Inflation succeeds (very low probability event IMO, but we will see it in jobs data and payroll data), then the answer is gold, commodities and oil. Stocks are an unknown, until it is obvious that deflation is winning. Right now, from where we are #1 eurodollars #2 energy #3 precious metals If we get a big correction in gold, 2 and 3 might flip flop Buying the dip in commodities in general is likely to be a good bet IMO. M