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

To: mishedlo who wrote (7105)	2/6/2004 10:41:39 AM
From: yard_man	Read Replies (4) \| Respond to of 110194

you picked up some silver futures or calls, too?? or was it another spread?

To: mishedlo who wrote (7105)	2/6/2004 10:58:36 AM
From: russwinter	Read Replies (1) \| Respond to of 110194

<Russ thought I was out of my mind.> Well, in all fairness I merely gave you the numbers from the DTS on wages and salaries, and said LOL. I have little idea how they are constructing job counts now, but W&S is improving at least for now. From MLK Day to 2/5 they are 80,944 versus 78,742, up 2.8%. Given that most new jobs are low paying jobs, that would clearly hint at higher counts. Obviously the markets love the idea of a whole new year of Japanese vendor financed borrowing of another $750 billion in mortgage and consumer debt against gains in wages of about $100 billion. That's the formula, and waiting for the world to use every last pound of copper, nickel and who knows what else. From 2/3 Contrary Investor: As a complete aside, over the similar post recessionary period of November 2001 through year end 2003, nominal household mortgage debt is up 23.4% and household consumer credit has expanded by 8.7% while wages have expanded 4%. Additional debt assumption, depletion of personal savings, and tax cuts have made up for the fact that wage growth isn't even keeping up with the understated headline CPI rate of inflation. In absolute dollar terms, since the end of the recession, wages and salaries are up $193 billion. Household mortgage and consumer credit has expanded $1.424 trillion. Clearly we're comparing apples and oranges here. We'll do some really simple math. Since the bulk of household credit growth has been for residential mortgages, let's assume that the cost of capital is 6.25%. Implicitly annual interest costs on $1.42 trillion at 6.25% would be about $89 billion. In other words, 46% of the total increase in wages and salaries over the last two years. You'll remember that aggregate household debt service relative to disposable income is currently running near 17%. Certainly 46% is a whole lot higher. Household debt expansion relative to wage expansion is 7.4 to 1. It's just a good thing that consumer oriented lenders of the moment care a lot more about inflated asset values as opposed to basic household cash flow expansion, isn't it?