Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Wyätt Gwyön who wrote (4757)	1/11/2004 10:35:19 AM
From: loantech	Read Replies (1) \| Respond to of 110194

<Bernanke IS actually very smart, in an IQ sense.> In fact he is so smart he actually encouraged an over indebted consumer nation to rush out and buy another SUV to help things out. LOL. LOL.

To: Wyätt Gwyön who wrote (4757)	1/11/2004 11:04:45 AM
From: russwinter	Read Replies (3) \| Respond to of 110194

<can ED rise even without a change in the policy rate?> I know you use contrarian logic, so don't you think the apparent consensus that the Fed can't or won't raise interest rates (except perhaps once, nominally in the "second half") until "after the election" is just too entrenched in the market? And doesn't it seem that the market appears to be blowing off serious and obvious inflation (apparently on the assumption it's irrelevant as long as "jobs aren't being created", and because the Fed is GREAT at putting out moral hazard behavior?), especially on the input side? To me the market is badly offside (suffering from a severe, and terminal case of moral hazard) right now on these relevant issues. I'm not looking for just modest inflation numbers, but shocking ones, especially in the intermediate goods sector. I do admit some confusion about the timeline and methodology of how early and intermediate goods inflation is being reported? Surely they use some real time tracking, but judging from Bernanke's remarks apparently not? And if China revalues it's currency, that will add another inflationary shock. <Hoisington, they think a significant rise is not sustainable (because the economy will tank).> I agree, the economy will quickly tank from the rate increase. So down the road Hoisington may be right? I understand the premise, but I don't conceptualize bonds as strictly trading off of economic strength or weakness. There are other more important linkages. The most important is how players are positioned, and that lots of leverage has been used getting people long bonds. And then there is the price distortion caused by the Asian CBs. There could be a bond crash first that flushes them out. That would be true of all markets, because everyone is long something, given the pervasive cash is trash mentality (). That will be a seminal event that has nothing to do with economic weakness. The Japanese will take huge mark to market losses on US holdings, that will put further stress on their JGB (Japanese gov debt at 175% of GDP). Not only will they look like the buffoons (in the same manner that the BOE was, selling their gold at $275), but it will be worse, as they will have grave bond portfolio losses. Once the market turns seriously south, the BOJ will get out of the way IMO. Also I think there will be credit related concerns about US debt, especially in the huge agency market. There is linkage from that to USTs. At any rate I have a very hard time visualizing a benign UST market in 2004, or even post-bust and beyond. <he seems to have this theory about making the Fed more communicative.> Oh, I absolutely agree, Bernanke is quite clear and simple in his communication style. I wonder in fact if he had family ties (what kind of national roots is Bernanke anyway?) with good ole "highly intelligent" Dr. Joseph Goebbels. That was ole Joe's style too: simple focus on simple concepts, spliced with a lot of disinformation (and avoidance of reality or bad news). You know all the nice things that unquestioning, trusting, simple German Volk wanted to hear: the ULTIMATE moral hazard. <what will prompt the Fed to act?. 1. Even more clear signs of rising inflation, that even the Fed's lagged models pick up on big time. 2. USD defense, the BOJ is exhausted. 3. Politics: even these sycophants do not wish to be thought of as totally in Bush's pocket in an election year. This will especially be the case if a Democrat emerges that might give Bush a challenge. () Cash is trash psychology: I have a very good friend that I've invested money for, and quite successfully. He mostly understands my approach to things. I talked to him Friday, about selling off half his energy stock holdings. He said, well Ok, but they're doing great. I said in effect, "buy low, sell high", and spoke about market participants being too long, and too willing to take on risk. Then he asked, "what do we do with the money?". I said, "nothing". It took fifteen minutes to overcome that, and this from a guy that has bought into my program and rarely questions anything I do.