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

To: philv who wrote (6676)	2/1/2004 2:39:36 PM
From: mishedlo	Respond to of 110194

Russ & Mish, you guys are a lot closer than it appears. Mish is arguing that we proceed directly to deflation, while Russ argues for a period of inflation first. The evidence speaks for itself, but whether Greenscam will call, hold or fold is the nub of this discourse. The suspect statistics can be read as a pre-curser or justification for future rate increases, or as a cause for the final blowout when they are proven bogus. Convincing arguments and corroborative evidence from you both leaves me more than a little confused. <g> I try not to forget it's all a gigantic con game. We can also both be right on our respective eurodollar bets actually. Some of the PUTs I am short are so far out of the money now that I doubt even Russ would think they have a chance of hitting. Some would require a 3 point hike in a year to hit. We still have not seen a bias change and the FED still says the risk of deflation and inflation is equal. I doubt there is much chance of a bias change without strong job growth and I doubt we see strong job growth. I also do not think the FED will hike until we see a bias change first. At least a couple months away IMO from even a bias change, and decay is much in my favor. To make a lot of money in his bet however, the FED needs to hike. Russ will lose (but relatively small) if held to expiry and there is not a hike. He picked his contract month cleverly to reduce potential damage. If they hike, I merely need them to take their ever loving time about it, and I am quite sure they will (since I do not think they hike at all. A cut does me no particular good other than give me profits faster. I do not want a cut in the US now. My position in Euribor is quite different. A hike there would destory it. I win small on no hike and only win huge on a cut. My Canadian position is small but there I win decently %wise if there are no hikes but I probably do have to hold that a long time to see them unless Canada cuts again. The ideal scenario for me is a CUT in europe, a couple hikes in the UK (to get me in there at tremendous prices), another fast cut in Canada, and the Eurodollar just sitting about slowly drifting back up to the old highs. I would then take more profits out of Eurodollars and move to the UK, and even welcome a hike in the US, to get back in here at great prices. M

To: philv who wrote (6676)	2/1/2004 2:43:48 PM
From: russwinter	Read Replies (3) \| Respond to of 110194

<Russ argues for a period of inflation first. > Plus it will be a real pernicious "Year of the Monkey" strain of it too. The fact that it's so strongly based in core and very essential goods and commodities is what will make it particularly lethal, especially for those following weak currency strategies like the US. I'm wondering why countries like New Zealand are moving to shore up their currencies with rate increases now? If there are any astute New Zealanders here sound off, but I'll bet finding a way to fund energy imports (with solid NZ$ relative to USD) is a big part of it. I'm going to do more research on energy pricing in Japan as well. It just doesn't make sense that a country very dependent on commodity imports (they even started the Pacific war in the 1930's and 1940's over this very issue) would want to be pegged to the USD, and pay MORE for these goods? At least China is recycling trade USD into building a strategic oil reserve (and putting more price pressure on oil doing it). And Europe has dodged a bullet so far because of their strong currency.