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

To: Wyätt Gwyön who wrote (4858)	1/12/2004 12:34:50 PM
From: Silver Super Bull	Read Replies (3) \| Respond to of 110194

Darfot, RE: "if we accept that the input/output stretch is not sustainable, then one or the other has to give. i'd say that the American consumer will not budge without jobs growth. this suggests to me that the "blink" may come on the input side--i.e., commodities could tank. another possibility is that intermediaries (companies) accept a lower profit structure...but this eventually leads to lower stock prices, and stocks being such a large part of the economy, me thinks this would be deflationary as well." I don't think many companies, especially retailers, will be willing or able to absorb rising costs without passing them on. Like you say, the big question is how the overextended consumer will react...will he cut back on spending if prices are rising, and how much? I think the inflationary "pandora's box" has been opened and I don't think it will be closed quickly, regardless of whether companies or consumers are willing to "pay up" for items. DB

To: Wyätt Gwyön who wrote (4858)	1/12/2004 12:48:12 PM
From: russwinter	Read Replies (3) \| Respond to of 110194

<extreme "hand-to-mouth" living, where people don't spend until they get their paycheck.> You have a growing economic group (), that fits this description. But you also have a larger group, that has cheap,easy access the "Asian credit card" . Those people can INCREASE their spending, especially if they feel confident that the Wizards will keep bringing out their moral hazard poms poms, and lead more bubble-economics cheerleading. Therefore, I don't see why stagnant income (not quite true given the 4% PI "gift" from Uncle) and poor wage growth (they just borrow to make up the difference) is a factor pointing toward the deflationary notion. Therefore I can only conclude that the haves will CONTINUE to put inflationary pressures on all kinds of prices. I underline CONTINUE, because it's clear to me after reading Bernanke in particular, that the FED uses ancient, pre-history price models, and certainly not real time dynamic ones (such as today's food moonshot), in their decision making. They are not only well behind the inflation curve, but the curve is doing a Jesse Owen's like sprint down the track ahead of them, while they stand there and put weird mushroom substances in their pipes. Even if they were to act on rates today, I think a high single digits CPI rate is out of the bag already, and double digits on intermediate input prices. () Unsung political hot potato for the 2004 election, that's going to bite the establishment class.