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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (2337)	3/17/2004 3:36:58 PM
From: Jim Willie CB	Respond to of 116555

they might, but only if continuation of current forces not saying they wont but am saying a big phenomenon is underway as USEconomy slows, bonds will rally more USDollar will slide, and receive more support by Asian CBs and the phenomenon continues, which you have rightly called you will look smart only as long as Asian CBs dont mind destroying their reserves by accumulating overpriced bonds of various types just like US corporations and private investors accumulated all types of stocks in 1999 / jim

To: mishedlo who wrote (2337)	3/17/2004 3:39:18 PM
From: Jim Willie CB	Respond to of 116555

check out this guy, Mike Benson lays out a sequence of events and developments for rates to rise, but not yet he discusses the carry trade and Asian CB participation the danger comes when long rates rise to kill off the carry trade since the mortgage refi movement is badly stalled, we are living off the carry trade, in his opinion I regard Richard Benson as one of my top10 people to learn from he dont miss nuthin, been following him closely for a year 321gold.com an important excerpt: Greenspan has just said that while Japanese intervention at some point will be problematic, that time is not now. Moreover, Greenspan has also indicated that it would be unwise for China to revalue now because money might flee China. While neither statement on face value is credible, what is obvious is that the only reason the carry trade has not "blown up" is because of Japan and China "pegging the 10-year Treasury" and if they were forced to revalue, they would stop buying U.S. Treasuries. Since our country has no savings and a $550 billion government deficit to finance, when Asia stops buying, our mortgage market will no longer be able to finance equity extraction from homes. Moreover, since wages and salaries are growing at less than the inflation rate, home equity extraction is the only source of unending cash to the U.S. consumer. If the consumer stops spending, not only would it mean that George Bush might not be elected President in November, but the whole world might enter recession. America is the buyer of last resort. In short, while a devaluation of the dollar against Japan and China sounds good, when that event comes it will bring a spike in long-term interest rates. A sharp rise in long-term interest rates will destroy the financial firms in the carry trade who have not yet sold their Treasuries and Agency securities to the Asian central banks. When the carry trade shuts down, our mortgage market will shut down, and we, as consumers, will have to cut our spending. This event will certainly be called a recession! / jim