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

To: mishedlo who wrote (3682)	4/6/2004 11:51:25 AM
From: zonder	Read Replies (1) \| Respond to of 116555

last year e.g., international fund managers reduced their exposure to US bonds by one third of their assets previously so invested, or by almost 1 trillion dollars. and yet, the market barely budged...this is a sign of great inherent strength With all due respect to Heinz - not really. It's more a sign of aggressive buying from Japan et al. There are signs that strategy is about to change, and if it does, I wouldn't want to be the one holding USD t-bills, betting on the "great inherent strength" of the US bond market :-)

To: mishedlo who wrote (3682)	4/6/2004 1:08:21 PM
From: yard_man	Read Replies (1) \| Respond to of 116555

all the bond bears point to the leverage and say lookie there -- it's all gonna blow up -- but that is not what happens during a deflation -- it simply can't happen ... non-performing loans fuel buying of "safe" alternatives and the yield "required" by a holder during a major price decline in those items supported by debt -- shrinks -- it doesn't appreciate ... I don't care what anyone says -- the Japanese, Chinese and whoever else own significant amounts of treasuries are not going to go shooting holes in the bottom of the boat we are all in together. Ultimately, borrowing will be reigned in -- even in the public sector ... Any big spike in rates here sets in motion debt deflation and that will bring lower rates -- not higher rates because there will be a "return" for holding plain ole cash. I think it is funny when folks talk about the return of volatility to the bonds when rates go up -- no one said the same thing when we had the recent drop -- so it goes ... TNX is still within a lovely channel -- pted down. I suppose we could go sideways for a while and fool a few people. Heinz told me once that he didn't rule out a single possible tightening of the FF rate. I do. If that happens the carry trade blows up all at once -- there won't be time to herald the "appearance of recovery." It's already too late for that, IMO.