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

To: russwinter who wrote (6628)	1/31/2004 7:54:49 PM
From: yard_man	Read Replies (1) \| Respond to of 110194

>>I see the cause of the bust as THE TRAINWRECK << I think we'll both make claims after the fact we were right, but whatsit-matter -- the bubble is the bubble. I think it collapses under its own bloody weight. You think it gets pricked by inflation. The result is going to be the same -- debt deflation and falling prices for housing and capital goods will be THE PRIMARY driving force behind a severe contraction in economic activity. Let's suppose for the sake of argument -- the bearish consensus (heck -- think about this -- it is not just the bearish consensus -- it is the macro-bullish consensus, too) on bonds is correct: A severe dislocation looms -- what then? After demand for housing and autos is crushed -- and it is clear that jobs are not coming back -- there will be absolutely nothing to keep the yields on bonds up, except for the risky corporates ... Rates on treasuries could spike in theory, but the affair would be so short-lived -- who gives a rip? This economy is too levered to interest rates -- should rates rise a couple of percentage pts the contraction in economic activity would undo the rise within a year at the very longest.