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

To: Jim Willie CB who wrote (6757)	2/2/2004 4:52:58 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

the USGovt is not gonna stand by idly and allow a supercycle deflationary collapse I agree. That is exactly why the FED is not hiking until there is job growth. Hiking now, when there is no wage growth or job growth and only "selective" inflation, would cause a deflationary crash. That is exactly the problem with Russ's rate hike to cure "inflation" problem. I think that you and I are far closer in thinking than Russ and I. If you will concede that what matters most in this economy is jobs, wage growth, and preventing a collapse in housing, then our views are nearly identical. If you think the price of copper is more important than jobs you side with Russ. Actually it is not whether or not you agree with Russ that matters, it is whether or not you think Greenspan will act that way or the market will force Greenspan to act that way. Clearly Russ would hike right here, right now, and damn the consequences cause he just does not care about jobs or houses or anthing but soybeans, copper, and oil. If Russ was in charge of the FED, I would just go nuclear short stocks sit back and make a million. With Greenspan in charge of the FED, we have a completely different situation. He is likely to put that rate hike off as long as he can, and in fact he is praying that he HAS to hike. His prayers will be answered IF and only IF we see job expansion and wage expansion. The way to make money in this environment is to be long eurodollars on dips. It sure is not a strategy if Russ was running things. What Russ does not yet understand is that Russ is not in charge. I really have no idea what you would do but if you tell me, I will tell you how I would play it. If I was in charge we would not be here in the first place, I would have taken my lumps in 1998 and started hiking then. In 2000 perhaps rates would have been 8% and perhaps they would be 6% now. That is irrelevant because I was not in charge of the FED in 1998. IF magically I allowed to make the decision now, I doubt I would do anything. Perhaps hike 1/8 of a point to see a reaction, but that would be it, and it would happen only after a bias change not just BOOM here it is. We have a lot of front loaded economic stimulus and tailwinds that are expiring. Huge tax credits for businesses expore this year and are probably already spent, round after round of refi provided tons of cash for consumers to spend. When those tailwinds are gone, odds of huge economic growth go with it. This "inflation" problem just might be about to cure itself, and it will if housing stalls. If I can read Greenspan's mind that is exactly why it pays (at this point) to be patient. If this economy is slowing he will not want to (nor will he IMO), hike into it. IF we have a recovery fueled by job growth and wage growth, he will hike. IF I was him, I would be patient waiting to see. Having missed 100 better places to hike rates, why would he hike now? He wouldn't and I wouldn't if I was in his shoes RIGHT NOW. He is very worried about the super-cycle deflation and fast massive rate hikes would likely cause one IMO, and aparently his, and possibly even yours. Mish