Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: ild who wrote (8954)	2/29/2004 1:17:02 AM
From: CalculatedRisk	Read Replies (2) \| Respond to of 110194

ild, I think you are on the right track My main idea is that something has to cause a slowdown in Real Estate. However, after the ECB cuts this week (assuming they will), I think the Fed may respond by intervening in intermediate term instruments (maybe the 5 year) and driving rates somewhat lower. A bond rally from here? Maybe. This would give RE one last gasp. I was predicting this possibility for the last few months, and mish found this article by the Fed's economists: Monetary Policy in Deflation: The Liquidity Trap in History and Practice federalreserve.gov This Fed article, from last December, describes the process: "One such approach is to implement additional monetary expansion by shifting the targeted interest rate to that on successively longer-term instruments, when additional monetary policy easing is warranted at near-zero interest rates." More bubbles!

To: ild who wrote (8954)	2/29/2004 11:38:56 AM
From: Steve Lokness	Respond to of 110194

<<Strong RE is also a big reason for high consumer confidence.>> Absolutely right on! The longer RE prices continue to escalate and the jobs remain weak - the tighter the rubber band gets stretched and the harder the fall. Houses have a lot of "stuff" in them. IOW, the increases in commodity prices cannot realistically be continually absorbed by builders and so prices are going to increase. As these prices increase and interest rates remain so darn low, people continue to trade up - keeping things going. .......Thus the catch 22 though; at some point the rubber band gets too tight and breaks!! Interest rates should move up before the commodity situation makes inflation unmanageable, but to do so makes the already weak job market worse AND puts sudden breaks on housing. Ouch!!!!! Housing crumbles and the economy slips back into recession. What then? Cut taxes? Whoops! steve