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

To: Chispas who wrote (8528)	6/30/2004 3:09:22 PM
From: mishedlo	Respond to of 116555

This is funny. I am going to print it all. RODNEY DANGERFIELD The Daily Reckoning London, England Wednesday, 30 June 2004 The world doesn't hold its breath. No change expected. But what's this? Gold plunges $8. Oil below $35. And curiously - worst quarter for bonds since 1980. America's degenerate capitalism...its degraded democracy...and a building with golden balls...and more! -------------------------------------------------------------------------------- It's Wednesday, the big day. And the world doesn't hold its breath. Nothing is going to happen to nobody, people believe. Today, the Great Enabler is supposed to announce a historic change in Fed direction. Henceforth, instead of making money easier to get, it will be harder to get - by, most likely, one quarter of one percent. Alan "Bubbles" Greenspan has made money easier to get than any Fed chairman who ever lived. It was so easy to get for so long that a lot of people got a lot of it. Consumers had more (borrowed) money to spend than ever. That they spent it on cheap, imported goods was a wrinkle the Feds hadn't counted on. Instead of inspiring jobs and capital spending in the U.S., the EZ money merely encouraged Americans to ruin themselves - while the jobs and factories sprouted in Asia! Now, Greenspan's reputation...and his economy...count on the recklessness continuing. Which is too bad for everybody because inflation rates are edging up. Interest rates are beginning to anticipate even higher inflation. The bond vigilantes, aslumber longer than Rip Van Winkle, now stir. Last quarter, they woke up and began to sell...it was the worse for bonds in 24 years. The Fed can't take this sitting down. It has to at least appear to protest. Its honor is at stake; which is to say, it doesn't have much to lose. So it intends to raise interest rates by .25% - enough to show its heart is in the right place, but not enough to trouble anyone's wallet. If the announcement comes as expected, we will take off our reading glasses and pause for a moment of silence, here at the Daily Reckoning office in London. The present trend has lasted longer than most marriages. A person could have bought a house in 1980 and refinanced almost every year - knocking almost a full percentage point off each time. Each year, he would have had more money to spend...as his mortgage payments declined. Larry Kudlow, a neo-economist, has written a remarkable article explaining why "this Bush Boom is a lot like the Reagan Boom 20 Years Ago." They are similar, we reply, but only in the same way that, say, Uma Thurman, stark naked, is a lot like Dick Cheney in a negligee. Both may have a certain appeal. It depends on your tastes. In every particular - especially the essential ones - the two are quite different. Bush is not Reagan. And America 2004 is not America 1980. Back then, stocks were cheap and gold was dear. Interest rates were high and bonds were low. It was, after all, before the boom began. If anyone knows how it can be compared to the period after the boom ends he doesn't work here in the building with golden balls (explanation below). 1980, we have explained, was contrary to 2004 in almost every way. America was still the world's biggest creditor - now, it is the world's biggest debtor. America still had a positive trade balance - now it has the biggest trade negative imbalance ever achieved by any nation. Americans were still, relatively, unburdened by debt. Now, they carry such heavy loads, they may collapse at any moment. Most important, the Reagan Boom and the Clinton boom that followed were largely, if not completely, driven by falling interest rates and EZ credit. Rising rates - which is what the Fed announces today - will have the exact opposite effect

To: Chispas who wrote (8528)	6/30/2004 3:19:03 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Bill Bonner. One of few on that site that gets it right. Bill Bonner, back in London: *** Gold plunged $8 yesterday. Inflation? Don't count on that either, dear reader. Oil, of the Brent crude variety, dropped below $33 a barrel yesterday. Chain store sales were reported as 'sluggish' for last week. And Wal-Mart cut its sales forecast in half. Autos are beginning to back up on inventory lots. Retail stocks are falling. These are not signs of 'heating up' or inflation. ...... dailyreckoning.com