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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 (17083)	7/30/2004 11:27:29 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Fri Jul 30 2004 18:34 trotsky (frustrated) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved that's what i'd call the 'Argentina alternative'. it can't be ruled out completely - for instance, in the 1930's, even the solvency of the government came to be doubted, and in an intensifying scramble for cash, coupled with huge outflows of gold, the bond market actually crashed not too long after the stock market did, in spite of 10% annualized aggregate price deflation and a sharply shrinking money stock. but that seems unlikely in the modern day era, on account of domestic demand for treasury debt probably outweighing foreign sales. don't forget, based on their investment criteria, pension funds and the like could easily shift their asset allocation models toward the opposite of what prevailed during the bubble - i.e. go from 70% stocks/30% bonds to 70% bonds/30% stocks. i believe that is exactly what they're going to do eventually. Date: Fri Jul 30 2004 17:38 trotsky (frustrated@Russell) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved in a nutshell: the huge domestic debt-mountain extant in the US is no reason to be bullish on the dollar's EXTERNAL value. foreign investors according to the Fed's most recent flow-of-funds report hold a record high USD net long position, over 5 trillion bucks worth of dollar based assets. should the US economy experience a deflationary debt collapse, domestic debtors would scramble to get cash, but foreign creditors would very likely dump the dollar. therefore the conclusions presented in the 'synthetic short position' theory are wrong. Date: Fri Jul 30 2004 17:33 trotsky (Raja@gold stocks and deflation) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved actually, no. on this point i disagree with e.g. Prechter, since gold's purchasing power tends to increase during deflationary times ( remember, it is money ) , even though it may not rise a lot in nominal terms. consequently, gold stocks should see improving margins during such a period and attract funds. in fact, in the modern-day policy making era it's a little more complex than that, since evidence of deflation results in the market anticipating INflationary central bank intervention in order to stem it. so you have a sort of back and forth between various groups of market participants that look to gold for different reasons. Date: Fri Jul 30 2004 15:52 trotsky (Gspot@money supply) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved please note: the year-on-year growth of M2 has just hit a fresh 10-year low. so, present money supply growth is not supportive of 'reflation' ideas. however, it supports the idea that economic growth in the US is about to weaken sharply, which in turn will entice the Fed to attempt to goose money supply growth once again and abandon its 'baby step' rate hikes campaign. Date: Fri Jul 30 2004 15:39 trotsky (Earl Grey@oil & bonds) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved as i have frequently pointed out, this is not the 1970's. those expecting a replay will imo be disappointed. we're in a deflationary era, and in a deflationary era, rising oil prices SUPPORT bonds, since they promise a slowdown in economic growth and credit expansion.