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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 (13171)	5/4/2004 12:38:21 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Tue May 04 2004 12:20 trotsky (WilE@bonds) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved 'there's a long for every short' - not in the Rydex universe. what's more, it really depends on WHO the longs and shorts are. big AND small speculators recently held all time record net short positions in t-note futures. if one adds up the interest rate contracts across the entire yield curve, we're looking at a speculative net short position well in excess of 1 million contracts. if that doesn't produce the mother of all short-covering rallies, i'll eat my hat. Date: Tue May 04 2004 12:15 trotsky (frustrated, 11:19) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved you state: "...the only thing at this moment holding inflation in check is lack of any wage pressure and rising productivity ." those are NOT the only things. a major datum in this context is the still depressionary industrial capacity utilization for instance. as for wage growth, it has indeed proven to be the weakest wage growth period ever experienced in a so-called 'recovery'. deflationary slack in the US economy remains huge - and very likely will become even bigger in the medium term, on account of economic activity weakening again. there is no investment spending to speak of, and meanwhile the housing bubble has led to a further pile-up of debt at the consumer level. note that every cent added to this debt makes a deflationary implosion MORE, not less, likely. if i were to speculate on a trigger event, i'd bet on the housing bubble finally going ker-splat. in recent months, overbuilding has created a huge overhang of supply in this saturated market, while without a doubt the creditworthiness of debtors has deteriorated further. imo this bubble has grown to such proportions that a tiny pin-prick will be all that's needed to deflate it - we're probably on the cusp, without knowing it quite yet.