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

To: ild who wrote (9956)	3/11/2004 12:09:20 PM
From: geewiz	Respond to of 110194

To all, Caroline Baum had a very insightful column (insightful for the business press anyway) yesterday. Dead Man's Trade No doubt some investors, predisposed to Armageddon over the horizon, are buying Treasuries on the assumption that the lack of job growth means the economy will roll over in coming months. However, ``the dominant influence is the carry trade,'' which involves some variation of borrowing short and lending long, Bond says. ``There's an army of people positioned in strange conditional structures'' using options. ``The hedging (by the option sellers) is so large, it's a case of the tail wagging the dog.'' To the extent that interest rates are divorced from economic reality, ``you now can truly say the bond market is a bubble,'' Bond says. bloomberg.com later, art

To: ild who wrote (9956)	3/11/2004 2:53:59 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Thu Mar 11 2004 14:16 trotsky (JD@long bond yield vs. earnings yield) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved these guys fall into a well-worn trap that characterizes deflationary eras. it is assumed that the old relationships between interest rates and various stock market related benchmarks that prevailed during the disinflation boom still hold - iow, 'old habits die hard', since that boom lasted for 20 years. however, this is a completely different ball game...what the sharp fall in yields presages is an equally sharp slowdown in economic activity. the reconciliation of debt still lies ahead, for both corporations and households. the recovery in SnP earnings over the past year is already a thing of the past, and at best a short term, cyclical reprieve that can be explained via the typical post bubble inventory cycle. it is meaningless in the context of the secular trend, which has changed toward falling profits ( as of '97, when US corporate after tax profits reached their all time high ) , slowing economic growth, and eventually deflationary debt default and asset liquidation. trotsky (Dow/XAU) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved tbis tight correlation remains extremely worrisome - since it might mean that the pm shares success or lack thereof remains dependent on a continuing stock market rally, which in turn becomes ever more doubtful.