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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 (8687)	2/26/2004 12:13:50 AM
From: mishedlo	Read Replies (2) \| Respond to of 110194

But I'm now more convinced than ever that I'm going to win the inflation part of our debate at least through the Train Wreck Phase, so let me ask you a serious and sincere question. Just going with my scenario laid out as follows how do you think the bond and stock markets (not Greenspan, the markets: includes the BOJ and BOC) will react? 1. A Feb PPI of 0.8%, (when finally revealed), or do you think it gets doctored lower? I think it comes out clean BTW 2. A 230,000 job number in March 5, same in April. After that, different story, but you need to get through two months of good labor numbers first. 3. Another 1.0% import price increase in mid-March 4. $39 oil and $2.50 gasoline by Easter, $42 and $3.00 by Memorial Day 5. Another 0.6% CPI in March and 1.1% PPI in March 6. Stories of shortages, delayed deliveries and surcharges coming out of Asia (and here) starting almost immediately, and building up steadily leading to a complete shutdown of whole industries by the end of April. 7. An April PPI of 1.3% and a CPI of 0.8%. 8. A major crop problem somewhere, but most likely China, evident in May, or substitute a geopolitical event in energy and add that increment to my $42 oil scenario. In the US, a major addition of $20 billion a month in consumer spending towards subsistence items starting just about the time the last tax refund gets spent in April. #1 Eurodollars should sell off. The question is from where? I really do not know. I posed a week ago that they would delay these things for a month. 1 week down 3 to go. gg/ng At that point I expect some kind of lie. However, there is quite simply no way to mask that PPI no matter how big a lie they tell. My guess as to how they pull it off is to attempt to compare Feb to Jan (skipping Jan to Dec) and hope that no one notices or cares. #2 This one is easier. Jobs suck. I think they have overpromised again. Even IF jobs are bragged about as being good (65% chance), the actual numbers in this regard will be seen to be a lie (and they probably will be a lie). If they can lie about the PPI they can lie about jobs. Why not. In that regard, I expect eurodollars and euribors to both go up tomorrow on jobs and/or durable goods. #3 I have not followed this number. I guess I should. Not sure when it comes out. #4 I expect oil to skyrocket if anything bad happens. I have a 60% probability of something bad happening. If it does and we get a sudden huge shock I think treasuries go UP, the stock market goes DOWN and more than likely Eurodollars go up. As stupid as it sounds from an inflation standpoint, the initial reaction will be a "flight to safety" #5 At some point (not sure when but possibly it is happening now), the US stock market will no longer think nice things about rising CPIs and PPIs. Eventually all news will be bad news just as last year all news was good news. March could be too early but we are seeing a slow shift away from risk, although idiots are still trying to hide out in the DOW. Once again I would expect Eurodollars to take a hit, but poor job data will override. Look at ATT tonight. Cutting 4000+ jobs. It is tought to get those back. The affect of Bank Ones 10,000+ loss has not even started. #6 This is counterintuitive to you but I expect several things to happen. Intervention in commodity markets, a huge stock market selloff, once again a "flight to safety" in treasuries, and god knows what in eurodollars. I would assume up but when shit is really flying like this who knows. I do not expect #6 to happen in actuality. #7 getting quite ugly here.Do you mean a one month increase in that? One thing you are ignoring in this proposal is rate hikes in China. It takes time for these to work in, but I am not sure China want to see stuff on the moon either. I really can not comment on April however until we see the reaction in March. Fair enough? #8 A crop failure. Could happen. Why not. I fail to see what interest rate hikes would do to fix it. Thus I fail to see the relevance but here is my guess. Once again, at SOME point, and not that far off (as in sometime this year) the stock market will take a hit on this. In fact, I would think that treasuries would take a hit on this one as well. My guess is that eurodollars would only be marginally affected, more out of treasury sympathy than anthing else. #9 I am adding this one. I do not think that Greenspan will hike into a falling market. I remain convinced that he will not hike into bad jobs data until forced (and I do not think force will come easily). I fully expect Japan and/or Europe to step up to the plate and support the US$ if need be. Oddly enough, if the US$ rallies huge here (good lord why should it but it could) then there might be less need for Japan and Europe to stepp up to the plate but........ #10 The risk of a US recession is ENORMOUS, possibly it is caused by your crack-up boom! Rising oil and food prices in the face of falling jobs and falling wages, and falling consumer confidence is a FATAL scenario. Hiking will kill more jobs, bankrupt more people, and probably cause a run on the stock market. No one and I mean NO ONE is discussing a recession here. Personally I think it is a given in 2005. All rate hikes will do is bring it on faster IMO. I guess they put the pedal to the metal and go for one more assinine refinance attempt and push rates lower one last time before this all blows up! In short we can both be right. Your crack up boom causes the recession the idiots made worse by prolonging. But right now, shorting treasuries or Eurodollars in the scenario I just laid out can not be right. Shorting stocks surte can be right but I have stayed away after getting my ass handed to me last year. Once we start making lower highs and lower lows it will be time. The DOW has yet to roll and shorting treasuries before the final "flight to safety" is a mistake IMO. Mish

To: russwinter who wrote (8687)	2/26/2004 12:25:37 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Fleck on Greenspan This is one of several posts on my board that you might be interested in Russ. Don't be afraid to stop by and say hello! Message 19849467