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

To: Crimson Ghost who wrote (5111)	1/14/2004 7:49:02 PM
From: mishedlo	Respond to of 110194

I agree 100% The problems are twofold 1)order of the bubble implosion 2)timing of it IMO both are critical. Treasuries are a perfect example IMO. The generals will go down LAST not first. An insane attempt to prolong this madness will keep interest rates and treasury yields low (for considerable periods of time) Only AFTER we have a massive writeoff of debt will treasuries and eurodollars get crushed. Quite literally that can take years if they choose to fight eventuality that long. I still say eurodollars are the safest leveraged bet on the planet. Now assuming one does not blow up shorting treasuries (remember my scenario of junk moving to treasuries, corporates moving to treasuries and finally equities moving to treasuries) hiding in treasuries can continue for quite some time. The global rush to zero% interest rates to keep the bubble alive has not hit it's logical target yet either. That target is obvious. As close to 0% as possible. But..... Corporates and most assuredly Junk do not reflect credit risks. Stocks are well beyond la-la land. IMO one can short stocks and risk getting their head handed to them on a platter or just buy eurodollars. (sorry to be so single focused but I see no better plays right now). I think the market will get a wiff of credit risk and/or deflation as and start to trash junk, start to kill equities and possibly even gold for a spell. Howver, gold will ultimately be viewed as a store of value and deflation/inflation/stagflation gold should do well over the long haul. The whole frigging thing is one huge mess but the order is important. Let's watch junk spreads and corporate spreads as well as the inability to float bonds at prices they want. Once people choke on debt the equity decline will begin in earnist. This "recovery" was one big crock of horseshit IMO. The bubble will burst with a) a simple refusal to buy more debt b) junk bond spreads widening c) corporate spreads widening d) some mammoth shock (terrorism) that causes a, b, or c to happen With equity volatilities at or near all time lows, complacancy near all time highs, everyone looking up, no one thinking we can decline in an election year, and assinine theories being floated that say the "real PE" of the S&P is 3.0 (no that is not a typo), we are staring into the abyss waiting for a trigger. Thoughts Mish