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

To: mishedlo who wrote (9263)	7/14/2004 5:44:52 PM
From: Wyätt Gwyön	Respond to of 116555

If inflation is up, bonds will sink and with that the US $ will probably rise with rising treasury yields while anything is possible in the short run, bond yields have a leash on them because the market knows Greenspan will not raise rates meaningfully. he is hemmed in due to consumer debt profligacy inter alia, so real rates will continue to be negative. over time, the market will come to realize that we are in an environment of "semi-permanent" negative real rates on the dollar, so higher inflation will simply push down the value of USD. the caveat is, it will take some time before the market realizes how completely the jig is up on the dollar (i.e., how completely toothless our Fed "inflation fighting" policy is), so there will be a series of lower highs in the form of USD countertrend rallies, as we have just seen. at some point, though, i think the whole USD hegemony will fall apart and then watch out below.

To: mishedlo who wrote (9263)	7/14/2004 7:18:24 PM
From: russwinter	Respond to of 116555

Mish, this post is an interesting discussion of the dynamics. For the record, I lean toward your assessment of it, although think the core CPI might run a little hot, with the Land of Oz number maybe 0.4%, the real world number is closer to 0.7%. The Pinnochio effect rally in commodities from all this will set up very hot inflation numbers that will be reported in August (for July). That rally may have started today. GSCI(CME) Aug 293.40 301.10 293.00 301.10s +7.25 7/14/2004 Reuters CRB Index(NYBOT) Aug 269.50 272.00 269.25 272.00s +4.50 7/14/2004