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

To: MulhollandDrive who wrote (3892)	12/26/2003 2:27:54 AM
From: Joan Osland Graffius	Read Replies (1) \| Respond to of 110194

Mulholland, I think I agree with your take on deflationary forces. Like I said, it is my opinion there is a law of economics that systems where massive amounts of capital are invested in non productive assets - this capital must be destroyed. I think during the destruction of capital the central banker must keep the money supply sufficiently tight where the new loans have a high probability of being serviced. In other words there is only high quality debt that enters the system. If the central banker and the banks would manage so only high quality debt enters the system, high inflation could be avoided I do not know what will get the citizens in this country to start saving. I believe we will have some event that will force this to occur and I would bet this savings will not be in stocks of companies that have no stockholder equity. <g> My goodness, look at the bankruptcies that are occurring and have occurred since we experienced the beginning of the first down leg in the US stock market. IMO, this is the first inning of 9. <g> If one looks at the debt of our governments, US corporations and citizens, there is a whole lot of capital that can not be serviced. We are starting to see here in Minneapolis the city defaulting on their revenue bonds. IMO, this is the tip of the government default cycle. I also think precious metals and other commodities will do well during a deflationary cycle as well as an inflationary cycle. IMO, the current thinking that gold, silver, etc. are assets to use as a hedge against inflation is bogus. These assets as well as other commodities are a hedge against a currency from a country that is in financial trouble. I am sure some commodities will not inflate during the next recession, but as long as the US dollar is declining against other currencies most commodities will do well in US dollars.

To: MulhollandDrive who wrote (3892)	12/26/2003 2:42:48 PM
From: Douglas M. Benedict	Read Replies (1) \| Respond to of 110194

This is actually a great chart...but looks flawed, in that it is trying to fit the K-Wave to some presupposed 54 year cycle and using the Stock indices as a reflection of economic activity...If I recall properly, Kondratieff was concerned with commodity prices...(rising prices of materials shift wealth from consumer to supplier; ergo: from the many to the few...and vice versa when material prices decline) financialsense.com If you look instead at the PPI/CRB you will notice that the cycle accelerated to 10 up yrs. followed by 20 down yrs., on the last "3" cycles starting in 1896 (20 up/20 down)...(there is 1 extra summer between 1908 and 1966...why this is not obvious, I cannot tell...but it happens between 1940 spring and 1948 summer, maybe the low interest rate policy during the war effort...)...once you factor in a third cycle between Spring of 1940, summer 1948, and autumn of 1960 up to the spring of 1970 accounting for the bull market of the 60's...the relationship of rising stock indices makes sense during the autumn periods when rising commodity prices are check-mated after a prolonged interest rate hike...ie: the high carrying cost of commodities forces dumping rather than inventory replacement...thus the bull of the 90's The stock indices upward movements reflect the profit margin improvements during the down/flat "INPUTS" cost periods (20 yrs)...while the flat/declining indices reflect the higher "INPUT-PPI" costs (10 yrs)... Looked at it this way, IF "INPUT costs" to the Chinese producers increase...one can expect poor profit margins and flat/declining indices until such time as higher costs can be passed onto the consumer and accepted... We may be into the start of a 10 year period of rising "INPUT" costs...in fact, this might be similar to the 1940-1948 period where the PPI/CRB rise preceded the interest rate hikes due to policy interventions (ie: war)... An accelerated K-Cycle makes more sense to me, given "global" demographics and the acceleration of technological advances this century... Anyways...just my 2 cents worth...(as I can't believe the K-Wave is etched in stone at 54 years, where speed has become the 4th dimension...) I just wanted to post this..so I can refer back to it...when someone says "Eureka"... I'm open to countervailing and supported opinions... May the commodity boom of the SPRING K-Wave reign ;) (The coming summer would be marked by rising interest rates) Doug Benedict

To: MulhollandDrive who wrote (3892)	12/26/2003 3:49:50 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 110194

It is amazing how some people are locking themselves in some theories and ignoring the dynamics that modernization and with it the shrinking of business cycle brings. the velocity of money and raw material to finished goods has accelerated substantially as the useful life of various widgets we use from clothing to transportation to homes. When the original K cycle theory was back tested everything was moving at a much more slower pace and aside from that the world was not filled with CB's to distort the monetary world. At that time we did not have "just in time" supplies and the manufacturer in China did not receive "real time" order adjustments from the retail sector like today Wal-Mart or Kaufhause etc. The only factor that remained the same is the generation gap and even longevity of human life changed. IMHO the K cycle needs some tinkering to adjust to modern times. It is very nice to build "chart fitting" theories but they not always work. Once a theory is widely known it rarely works more so when there are efforts to avoid the negative results of that theory