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

To: russwinter who wrote (11989)	4/15/2004 12:26:37 PM
From: mishedlo	Read Replies (3) \| Respond to of 110194

You seem to be holding two contradictory thoughts in your mind at the same time 1) That the US consumer is going to hit the wall soon (your words) based on refis and refund checks ending. Throw in higher gas prices and you have a triple whammy. I agree with this view. I will add a point that if the US consumer gives up, we lose a lot of jobs as well. I am guessing that you would agree with that. 2) OTOH you seem to think the boom in China can go on forever. (I am using forever as a relative term meaning quite some time). Much of this output in China is headed towards the US. If the consumer of last resorts stops buying what else is there? They have so much misappropriated capital its not even funny. Someone posted that if one new auto factor is good, 10 must be better (not that they believe that but that is the mentality in China). Andy Xie called yesterday for a hard landing in China. A hard land will STOP the commodity boom IMO (and in Andy Xie's view as well). I would agree 100% with that last article he wrote. That is a complete turnaround for him. He does not think there is "inflation" based on wages and wage growth and jobs. He and Heinz both dismiss commodity inflation for whatever reason. OTOH you think that ONLY commodity inflation matters. As best as I can tell that would be your biggest (ONLY?) disagreement with Andy. At any rate, If you are correct that consumer spending falls off the cliff here, and Andy or I am correct that China will slow SIGNIFICANTLY, then we come full circle: what is the case for massive rate hike? In fact is there a case for ANY hikes. I will ask you this, is it possible that fear of hikes alone, and mortgage rates going up, and refis dropping off the cliff (particularly if jobs start sinking again), was just enough to prick this bubble? I think that is possible and perhaps even likely. If I can guess your answer you would say possible but not really likely. At any rate, back to the contradiction. If the US consumer gives up, demand for commodities here anyway will fall (autos houses, etc etc etc). That will slow the production of goods in China (headed for the USA) for sure. Now, the 50M question is: I China headed for a hard landing (we both would agree yes I think), but perhaps we disagree as to when. If it starts soon we are going to see falling commodity prices, slowing investment, Europe is already on the brink of a recession, and the whole world is headed for a recession that quite honestly NO MAJOR ECONOMIST in the entire world see right now. I believe the world hits a huge recession next year, and as stupid as it might sound, fear of the hike (or of massive hikes) might be a trigger whether or not we actually see any. Thoughts? Thanks Mish