Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (18098)	8/26/2004 5:00:54 PM
From: russwinter	Read Replies (2) \| Respond to of 110194

"Owner's eq rent", now that's funny. <In fact those questions all lead up the the same thing. Here we go again: deflation> You can call some of this deflation, I prefer the term maladjusted economy (with a large dose of inflation). And I believe the maladjustments are caused and encouraged by excessive borrowing from hyper-low borrowing rates, engendered in large measure by govt interference (BOJ currency intervention, Wizard of Oz moral hazard road shows, etc). Keeping rates low fuels the maladjustments and then leads to economic weakness.

To: mishedlo who wrote (18098)	8/28/2004 8:07:05 AM
From: russwinter	Respond to of 110194

Maladjustment du jour, Doug Noland excerpt: While Credit Bubble analysis is very much “macro,” it is as well imperative to get right down to the nitty-gritty when it comes to examining borrowing and lending: who is lending to whom for what, and what liabilities are created in the process? There is today considerable evidence that Credit Availability is abundant throughout and, perhaps, even turning easier. Subprime lenders have been picking up their lending, while bank loan officer surveys suggest loose standards and a hankering to expand small and mid-market business lending. And, importantly, there is no indication of any tightening from historically ultra-easy lending standards throughout mortgage finance. If anything, the global rush for higher yields (and resulting boons for CDOs, Credit default swaps, and “structured products” generally) has become only more intense. There are today truly Booms at the Fringe and The Core. But what is there to take away from this analysis? Well, it would be truly extraordinary (unprecedented?) for the economy to roll-over with such ultra-easy general Credit Availability and robust lending growth. At the same time, the economy is ominously less than impressive considering the extraordinary financial backdrop. Looking at the decline in rates over the past few months and, as well, factoring in the apparent heightened quest for risk assets, I will err on the side of expecting spending to be resilient through year-end (although this is an admittedly tenuous forecast). But how much will continued buoyant expenditures stimulate U.S. investments and hiring? Data from the ports of Long Beach and Los Angeles do not bode well for U.S. economic prospects (or July’s trade deficit). Inbound containers into the Port of Long Beach jumped to 281,817, surpassing the previous record set in June by more than 21,000 containers. The Port of Los Angeles also set a new record for inbound containers, with July’s 361,584 slightly ahead of May’s record. Total Inbound containers were up 15% from one year ago to 643,401, while total loaded outbound containers were about unchanged at 178,382. Containers leaving the two ports empty surged 24% from July 2003 to 384,279, more than double those leaving loaded. Wow… I recall reading articles highlighting noteworthy examples of spending extravagance that preceded by only months the respective crises in Mexico, Thailand, Russia, Brazil, and Argentina. But, then again, lavish purchases and ballooning trade deficits are a hallmark of Monetary Disorder. And while profligate spending is not a fresh development here in the U.S., I couldn’t help but to think that almost 400,000 empty cargo containers leaving the Los Angeles and Long Beach ports during July is a signal along the same lines of booming Mercedes sales in Russia during 1998’s first half. And I cannot also help but believe that “strong vs. weak U.S. economy” debates have basically become moot. What should be clear at this point is that even huge fiscal stimulus and unprecedented financial excess are incapable of fostering a sound and self-sustaining economic expansion. The paramount issue, today and going forward, is the deeply maladjusted U.S. economy and its increasing unresponsiveness to even enormous yet misdirected financial stimulus. Both the Financial Sphere and Economic Sphere are severely maladjusted. Two years of Fed-orchestrated “reflation” have only added to the U.S. economy’s inflated cost structure and further weighed on global competitiveness. Meanwhile, the Global Credit Bubble (and China and Asian booms, in particular) has worked to strengthen the capabilities (financial and economic) of our determined competitors. But we should have expected nothing less. Today’s Boom at the Fringe is but a further manifestation of historic Credit Bubble excesses that has inflated asset prices, bolstered consumption and imports, and inflated the general economy’s cost structure, while having limited impact on sound business investment. And I will stick with the analysis that today’s predicament of Monetary Disorder and Deep Structural Economic Imbalances is on course to precipitate some type of financial crisis. But, appreciating the extraordinary nature of current global financial systems and markets, it is anyone’s guess as to how long market “ebb and flow” can hold tumult at bay. We do know that the U.S. economy and markets require $2 to $3 Trillion of total annual Credit growth. Succinctly, there remain two overarching issues: First, how long can this amount of Credit creation be maintained? Second, what will be the nature of Inflationary Manifestations while the Credit Bubble is sustained? () () More recent evidence of inflationary manifestations: Message 20458565