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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 (9610)	3/7/2004 9:41:35 AM
From: austrieconomist	Read Replies (1) \| Respond to of 110194

Recession call. You mean no one in the mainstream press and financial community? I'll bet well over half on this thread would bet on recession beginning no later than 2005 (with all due respect to Bank Credit Analyst).

To: mishedlo who wrote (9610)	3/7/2004 10:12:09 AM
From: russwinter	Read Replies (3) \| Respond to of 110194

<Oil is indeed a wild card.> Unfortunately, it's not just oil, although that's a big one and could well be the "trigger" to spook consumers. But, it's also food, and the whole range of metals and other input goods. So I consider it an aggregation of goods inflation, not just specific to energy or copper, or nickel. If you don't choose to call runaway prices in all the items I've posting inflationary, fine, but it's still an overwhelming Train Wreck(), not isolated. <Already consumer confidence is headed into the gutter.> Clearly, consumer led economic strength is on an extremely weak foundation. The excesses are beyond belief, so of course your saturation argument has merit. I haven't really been arguing that point with you, except to say that fresh double digit type credit growth (the tiger) is the driver of the economy, not jobs (the wildcat). The other catalyst could be a sudden bond panic or withdrawal of credit from US consumers. We can't rule that one out either, but as of this weekend there is no evidence of that. Message 19867636 Message 19883972 There is plenty of evidence, that the inflationary Train Wreck will be the catalyst, not some consumer exhaustion in a vacuum (credit panic, yes). The Fed has no ammunition to deal with it either. So if (likely I think) we get a Trainwreck combined with a consumer rollover or even collapse, 25 bps rate cuts will only make the problem worse, and certainly won't create jobs. The only beneficiaries of a rate cut, would be speculators, the rest of the planet will be murdered with this policy. That will led to a crack-up boom and monetary meltdown, not just a bad recession, or depression. () One of the points commentators are making now that input goods inflation finally has to be acknowledged is that "commodities are only 20% or so of the cost of final production". Two points on that: 1. If you take an item such as packaged food you will find that about 19% of the cost is farm value (the commodity). But then, another 8% is the energy required to bring to that commodity from the farm to the shelf. Then another 8% is packaging, which in turn has it's own set of input goods costs. So I submit that raw and intermediate goods inflation has a multiplier effect. But a big factor that almost nobody has spoken about, is the fact that the these price surges and bottlenecks just destroys excess capacity and the bogus, mythical "output gap". The important letter I posted from my friend's steel supplier illustrated that in spades (see "idle" European mills). Message 19886876 2. I submit that Asian production is even more susceptible to commodity and input goods Train Wrecks than the US. I'm going to research this more, but labor costs are a much smaller part of the total Asian production process, and commodities much more. Therefore, this inflation will drive Asian production completely into the ground, as they incur massive losses. I expect whole industries and key production links to collapse in Asia (and the US) throughout the spring (). That means surviving producers won't be able to get important widgets and intermediate goods necessary to finish products. It will look like the Delphi situation multiplied by an infinite factor. Message 19886398 I wish I could find a way to track incoming goods imports into the West Coast on a weekly basis. It comes out monthly for the major ports, but that lags too much. pacificshipper.com This will happen fast. () He with the strongest currency to purchase USD priced input goods, survives the longest in this scenario.