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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 (8904)	2/28/2004 10:17:28 AM
From: mishedlo	Read Replies (2) \| Respond to of 110194

Actually a fair question, but I'm proceeding on the theory that market's aren't yet 100% rigged by Wizards or subject entirely to the smoke and mirror ploy. I guess the debate is are they 50% rigged, 70%, and I'm not sure which, and that's the risk I take. Why do you call it rigged? They have said what they were doing and why. Back in January I did not think they could be more clear. I started playing this stuff back in September when they first started talking about jobs. They have reiterated that message probably 5 time since then, but no one seems to listen. What they are doing does NOT have to make sense. That's the beauty of it all. I firmly believe that until we see some evidence of job increases, several months in a row, that nothing is going to happen. I have said this before and I will repeat it. Jobs suck, they will continue to suck, and the FED is too stupid to see that thay can not get jobs to un-suck no matter what they do. It is mind boggling to me that they can not see that their effors will not produce jobs other than in China and India. I also believe you are ignoring several things 1) Rising inventories 2) Chicago PMI near all time high and inventories rising. Where is it going from here? 3) Tightening of money in China. This takes time to work its way thru. We are not going to see that impact in 1-2 weeks. It might take 3 months. 4) Europe economy is very weak. Growth is low and so is inflation. Now you might scoff at that idea but remember they are buying stuff in Euros and inflation is indeed far lower over there in all liklihood. 5) I talked about this at length above but failed to mention the only reason unemployment is lower is that this game is indeed 100% rigged. People are dropping off the rolls like mad so rate goes down. Look at the idiots in Washington talking about reclassifying McDonalds's jobs as manufacturing! Did you see that? Bush actually proposed it. Man these guys are desperate. Why did Snow, Bush, and the labor Secretary all drop the promise of jobs? Why? Because jobs suck that's why and they will continue to suck. If they come up with some BS jobs number next moth I probably will not believe it. You do not believe their CPI lies, why should either of us believe employment lies? Seriously. How hard did they have to fudge Dec to get jobs at +1,000? They want +250,000 a month and managed +1,000. That is damn pathetic don't you think? 6) Auto sales suck. Totally. Not a good sign. I sense consumer exhaustion and rates are already at 0%. What next for an encore? 7) Consumer sentiment. Totally "unexpected" huge drop. When consumers lose confidence they stop spending. Why are they losing confidence? Jobs! Mish

To: russwinter who wrote (8904)	2/28/2004 10:46:01 AM
From: mishedlo	Respond to of 110194

Free Trade Wars February 27, 2004 By John Mauldin Where Have All the Jobs Gone? More Dead Economists Repeat: The Fed is Not Going to Raise Rates Trade Wars and Other Disaster Scenarios Gold, the Stock Markets and the Dollar More Airports and Bull's Eye Investing (ok - add Mauldin to the list of true believers- we are still few and far between) This article is a good read. frontlinethoughts.com

To: russwinter who wrote (8904)	2/28/2004 11:06:23 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Mauldin..... Repeat: The Fed is not Going to Raise Rates You wonder why the Fed is willing to be patient on lowering rates? One of their mandates is to help foster employment. If you look at their predictions for GDP over the next year, they are suggesting over 4.5% annually. Yet their job growth number is not even 150,000 jobs per month, which is barely in line with the growth in population. What is unwritten in the assumptions is that it would take growth of over 5% to seriously cut into the unemployment number. And that level of growth is just not in the cards. Raising rates would slow things down and hurt job growth which would soon create a recession. We threw everything but the kitchen sink in the form of possible stimulus at the economy last year, and we are barely over 4% today. Without job creation, we are at the limits of GDP growth. Stephen Roach of Morgan Stanley and one of my favorite analysts, wrote an open letter today to Alan Greenspan, calling for him to immediately raise short term rates to 3%, so the Fed would have some room for rate cuts during the next downturn. This is not going to happen. Greenspan just touted the virtues of adjustable rate mortgages this week. (I simply do not understand why he would do this, even if his logic might be impeccable. He should not be encouraging risk taking and more debt.) In any event, do you think he would do that if he were planning to raise rates anytime soon? "Hmmm, let me see, what can I do to create the most harm possible? Tell people to get into adjustable rate mortgages and then raise rates? That would cement my reputation." A Financial Times article noted the problem with auto loans, as there are more and more taken out for 6 and 7 years, which is good for sales today, but borrows from future sales. The article goes on to make the point that these longer period car loans mean that it takes longer for borrowers to get to "break-even" on their loans, thus longer before they can buy a new car. Rising rates would make that period even longer. There comes a point where new car sales are going to suffer from the current trend of borrowing for longer periods. Next year, independent auto analyst David Littman projects that auto sales will start declining. "This year, he predicts, tax breaks and other political actions during the presidential election campaign will support auto sales by boosting disposable income even if interest rates rise. But next year he forecasts sales of cars and light trucks will drop to 16 million, from 16.8 million. That might not sound like much but it is the equivalent to a more than $22 billion revenue cut. 'That is the end of the world for a couple of automakers.'" We add to that this note from the normally upbeat Dennis Gartman: "The US' economic news was anything other than stellar yesterday. Jobless claims rose to 350,000 from 344,000. Debates rage amongst those who make jobless claims the focus of their lives regarding weather and problematic seasonal adjustment factors, but we pay little heed to it. To those in that debate we say, in all dispassionate honesty, 'Get a life!' If we must pay attention we note that the 4-week moving average rose to 354,000 from 352,000 and that this is the 4th week in a row that this smoother number has risen. This, we think, is worthy of note and this we think is bothersome. "Further, we note (disappointingly) that the sales of new homes fell 1.7% to just over 1.1 million units. That in and of itself was disappointing, but this is also the lowest level of home sales in 7 months. Worse still this slowdown in home sales is taking place even as the supply of new homes has risen to what is almost a decade long high of 370,000 units. "Finally, January building permits here in the US were revised to 1.92 million annualized units from the previous estimate of 1.899 million. In light of an already problematic increase in the supply of new homes, this revision is not 'wanted' news." Maybe Roach is right. Maybe raising short-term rates this year would not be the serious problem I think it would be. Maybe the economy keeps on chugging. But I think the Fed believes that raising rates today risks slowing the economy down at a time when there are not enough jobs being created, housing is showing signs of weakness, the auto industry would get hammered, borrowing costs for business would rise and thus profits hurt, etc. etc. It is Pascal's wager. Even if one might think risks are small, do you risk the greater harm? If Greenspan were to raise rates now and the economy began to slow, the mob would form and someone would start shouting "get a rope" as they head for the nearest tall tree.