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To: Perspective who wrote (93002)	3/10/2004 10:04:34 PM
From: skinowski	Read Replies (1) \| Respond to of 209892

Bobcor, I think that you are much more sophisticated in these issues than I am, but here is my simple homegrown take. I am particularly interested in inflation, since I believe the government MAY at some point engage in "unconventional" means of bringing money into the system. Deflation and inflation may well be two sides of the same coin. As fiat money becomes too abundant, prices will inflate against that fiat money. The rise in the interest rates will create a lack of liquidity, which is in effect deflationary. Anything leveraged - or, which requires borrowing in order to be bought or maintained (like leveraged businesses, or real estate) - will lag in price appreciation as expressed in fiat money. A borrower will have a choice - either to borrow fiat money at a high interest, or borrow (obtain) something which will be perceived as a more stable and more attractive store of purchasing power, like perhaps Swiss franks - or gold. If an Israeli in 1973 - or, a Russian in about 1979 - or a German prior to the 1923 monetary disaster (don't call me on the exact dates) would have converted his liras and rubbles and marks into a different store of value, like for instance into Swiss franks, than later he could have converted them into the brand new currency of their respective countries, and his wealth would have survived the hyperinflation and remained intact. If he would have kept his savings in their original fiat denomination, they would become trash. What I am getting at, is that it is not only possible, but inevitable that hyperinflation must occur simultaneously with severe deflation. The deflation in prices will be against the progressively increasing costs of borrowing of the native fiat money (even as its value is crashing) AND against independent units of value which will play the role of TRANSITIONAL money - between the disappearing original fiat money, and the future new 'improved' currency, which the government in due course would inevitably issue. In case of hyperinflation an investor - especially a shorter - will probably be unable to keep up with the disappearing value of his returns. You'll sell for "X" and cover for, let's say, a quarter of "X" - but the purchasing power of the total by then might be 10% of the original "X". Now, you can take me apart at your leisure... -g

To: Perspective who wrote (93002)	3/10/2004 10:29:52 PM
From: reaper	Read Replies (1) \| Respond to of 209892

<<Reap, do you suppose we're into the next phase now? I've been expecting a turn from the reflation-wins theme toward another deflationary scare>> i honestly don't know (or, maybe more appropriately, i don't think that i know), at least as it relates to your "now" question. i have no doubt that it is coming, but whether it is NOW in motion..... what is clear to me is that Friday caught pretty much everybody leaning the wrong way. EVERYBODY is leveraged to the hilt, and positioned for GRADUALLY RISING SHORT rates and a flattening yield curve. NOBODY is positioned for RAPIDLY FALLING LONG rates and a flattening yield curve. what will be interesting now is to see the follow through. the TNX bounced pretty much at a nice fib ratio the MCHJC observed a couple of days ago today. IF we hold here, and there is not required hedging on top of hedging, then we have staved off execution for another day. what makes me think we MIGHT hold here is that spreads have NOT blown out in other risk markets -- i.e. high yield, corporates, dollar swap, etc. that is where i continue to look for my clues. the reason i have not really switched over to the "reflation wins" camp is average hourly earnings. they were +1.8% or so in the last month (on a year-over-year basis), which is among the lowest readings in the last 18 years. while people are all concerned about the JOBS number, what they really should be concerned about is average hourly earnings. if you sit down and do the math, you will see that whether we add 0k or 200k jobs per month is friggin' irrelevant vis-a-vis whether the 150mm people who ARE working are getting average hourly earnings of >+3.0% or <+2.0%. there is a backlash coming against corporate America, and the results are not going to be pretty. all corporations are evil for outsourcing. drug companies are evil for charging too much for medication. food companies are evil for making us obese. WalMart is evil for not paying peopel enough (we'll ignore that by not paying people enough you can buy groceries at a 25% discount to a Safeway or Kroger supermarket). Martha Stewart is going to jail for doing friggin' nothing. every day CNBC leads off with Scrushy or Ebbers or the Enron crew or the Rigas family. people are apolplectic over Janet Jackson's breast. Clear Channel is throwing Howard Stern and Bubba the Love Sponge off the air. we have soooooooo seen this movie before. by the way, does anybody think its just a coincidence that the Naz topped the day before John Kerry won New Hampshire and solidified himself as the dem front-runner and likely next President??? Cheers