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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 (9568)	3/6/2004 10:56:06 AM
From: loantech	Respond to of 110194

Edit you answer my question lower down

To: mishedlo who wrote (9568)	3/6/2004 11:30:57 AM
From: studdog	Read Replies (1) \| Respond to of 110194

Thanks for the explanation, Mish. I understand your reasoning and compliment you on your prognostication. Now I am very curious how you are positioning yourself. You were out of gold if I recall, but are now back in, correct? What else are you doing? Thanks Karl

To: mishedlo who wrote (9568)	3/6/2004 12:26:24 PM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 110194

I speculate that those jobs reports are highly manipulated and even with a slow recovery may be there is a possibility that they under report now to be able to exaggerate later toward the election season - just a thought

To: mishedlo who wrote (9568)	3/6/2004 2:26:47 PM
From: el_gaviero	Read Replies (3) \| Respond to of 110194

Thanks, Mish. I agree with much of what you say. You have been right-on about interest rates and about the crucial importance of jobs. I was not really talking about jobs, interest rates or inflation per se but about a different problem. Why are certain people saying that prices are “distorted” --- i.e., Russ, for example, in the post I responded to, or me. What do we mean? To speak just for myself, what I mean is this: when four or five men in the Ministry of Finance in Tokyo decide to buy 90 billion dollars of US money in 70 days, they distort the market. The benchmark against which I measure this distortion is a market in which the yen/dollar exchange rate would have emerged from decisions made by tens of thousands of independent actors. When you talk about a further fall in yields on treasuries, you have to be assuming that the M of F in Tokyo will continue along on its hyperactive path. If they stopped buying our money, our interest rates would skyrocket. What are risks associated with a hyperactive M of F? Two come to mind. 1) The obvious: liquidity is piling up in the Japanese economy somewhere. The Bank of Japan creates yen to buy dollars, then sells yen denominated bonds to soak up (i.e. sterilize) the money it has created. Since interest rates in Japan are 1.5 %, this means the cost of soaking up yen is low --- 15 a year to soak up 1000. Good deal. But bonds have to be piling up somewhere. Darfot told us the other day that it was in the Post Office retirement fund. But still, there has to be some kind of market for these sterilization bonds. They can be turned back into yen and those yen can hit the Japanese economy as demand. In other words, I think there has to an incipient inflation problem in Japan, strange as that may sound. If some trigger were to make the incipient become actual and active, then the world would change instantly. 2) The subtle. Markets throw off numbers in the form of ratios, averages, trends, etc etc. People use these numbers to figure out what is going on. When tens of thousands of (more or less independent) people drive a market, the numbers thrown off are probably pretty good. Large numbers of people can’t change quickly and will not respond in the same way in any case. But when a market is distorted by the actions of a small number of people of disproportionate influence, then the numbers don’t mean as much. There is a big gap between the market of the tens of thousands, and the market of the tens of thousands PLUS the four or five. If the four or five change their minds, or make a mistake, you have a rough transition, and the numbers you were looking at, before the four or five changed their minds, are useless. This is not an argument for any particular investment strategy, but it is an argument for huge caution. (I have a lots of cash, some gold and a little energy.)