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

To: Jim Willie CB who wrote (5268)	4/29/2004 2:54:28 PM
From: I_C_Deadpeople	Read Replies (2) \| Respond to of 116555

I believe the steel pensions were also dramatically underfunded due to the use of optimistic assumptions, such as 9 or 10% return, etc. By the time the REAL deficit is known it is too late. Similiar problem with Air Canada at this very moment. They owe $1.2 Billion to the pension plan but no one will buy the company from bankruptcy because of the pension plan. Catch 22 for the current workers - but worse for the retired ones as they have little or no say in the negotiations. As much as the companies have to be at fault in these cases, i blame the unions as well, they knew about the bell curve of employment.

To: Jim Willie CB who wrote (5268)	4/29/2004 5:12:52 PM
From: mishedlo	Read Replies (5) \| Respond to of 116555

Soapbox Today was the first day in something that seems like forever where the Euro was up huge vs the US$ and stocks were down big. Gold could not rally much with that unfortunately, but perhaps a sinking US$ is bad news now instead of good. This market is only focused on one thing and it sure is not earnings. Given the rampant insanity with stuff like RHAT, RIMM, and ASKJ at PEs in excess of 100-300 (and probably no earnings at all if options are considered) this selloff was long overdue on valuation. In fact, this is not even a selloff if you ask me. Sure TASR is down 40% or whatever from the highs but is ASKJ a fundamental buy above $2? Here it sits near 40! That said, this selloff is probably not about valuation either. This market is focused on interest rates. Period. In spite of what the Cramer's of the world say, some of this high flying trash does not seem to like the prospect of higher rates. After all this talk about deflation, perhaps we see stagflation first (for a brief period) before we head into the deflationary ice storm that is approaching. There is no talk of recession from any prominent economist. Many forecast a "double dip" recession for this year or last. I did and I was wrong. I was not alone. Roach, Zeev, and others forecast a "double dip" as well. Quite simply there was too much concensus for it, all of us ignoring the mammoth liquidity provided by lower and lower and lower interest rates, and round after round after round after round (is that enough rounds?) of cash-out refis. GDP today was 4.2. With all the mammoth gov't spending, housing boom, retail sales, hedonic adjustments, etc is that the best we could do? What do we do for an encore now that cash out refis have hit the brick wall. This is no longer an IF and WHEN, this is a NOW! Barring some sort of wizard of OZ miracle, cash out refis are OVER. Now what? This year we had EASY earnings comparisons to the recessionary lows. We had an enormously profitable carry trade from the banks. We had earnings going up because of the falling US$, we had the boom in China, we had (and still do) a housing market that just will not stop. Right now, our fate is somewhat tied to China. IF China slows quickly, inflationary pressures on commodities will either drop like a rock or at a minimum stabilize here. Since copper, aluminum, and silver are well off their highs the PPI might start hinting at disinflation. If China can not contain itself, the US will do it for China with bigger rate hikes and less demands for goods from China. Longer term, I see no reason for oil prices to come down significantly, but IMO that adds to deflationary not inflationary pressures unless wages and jobs keep up. Headed into a recession, they will not keep up. Rising oil forecast the last recession, and it may be forecasting this one. The more consumers spend on food and gas, the less they can spend on discretionary spending. I was wrong about the double dip but I am going for redemption here. I am calling for Recession 2005. Put it on your calendar. The higher interest rates get, the worse it will be. There is a decent chance it is 1/2 and out, or 1/4, 1/4 and out or even 1/4 and out. The Grand Reflation experiment is over! Greenspan does not see it now, and hardly anyone else does either. That does not mean we can not have one last sucker rally (if the market perceives Greenspan can not hike as much as is expected). I am not calling for it, but I will not be surprised by it either. One to Two years from now, we will feel the full brunt of this burnt out shell of reflation. It will be icy cold. K-Winter is approaching. Mish