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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 (6819)	2/3/2004 11:32:03 AM
From: mishedlo	Read Replies (2) \| Respond to of 110194

I dont mind disagreeing do you expect no effect on TNX rates... from rising USGovt debt requirements, from continued Asian diversification away from US$-based, from Chinese diversion to credit supply of growing middle class, from rising commodity prices (incl energy) from rising Asian import product prices ?????? these are the forces which will provide bond yield headwinds how about commenting on how all the above will be overcome, and lower rates will occur Treasuries are really quite simple 1) As long as China and Japan have more to gain than lose by buying US treasuries, they will continue to do so. I do not think China is close to being a self-sustaining growth engine. Perhaps a couple years. Right now they benefit for supplying cheap goods to over-stretched US consumers 2) As long as the Carry trade can make money borrowing at 1% and lending at 4% they will continue to do so. It is probably one of the biggest sources of bank profits. I do not think greenspan will want to prick that "bubble" unless and until we have a genuine recovery here that produces jobs and higher wages. 3) I do not think this economy is providing higher jobs and wages. In fact I guarantee you that it is doing just the opposite. If Russ was in charge of the FED my analysis would be much different. Russ is not running the FED. Mish

To: Jim Willie CB who wrote (6819)	2/3/2004 2:08:20 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 110194

<<do you expect no effect on TNX rates... from rising USGovt debt requirements>> Eventually...probably in 2005 or 2006. These things work with a rather substantial lag. Furthermore the Fed will likely be less accomodative in the months after the election. Asian diversification? I see it in China, but not in Japan where they're fatally dependant on the US consumer, to the point of committing financial hari-kari to "save" (HO HO HO) the ClownBuck. I think the the BOJ as a subsidiary of the Fed...at this point they're joined at the hip, and they'll drown together when the time comes.