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: russwinter who wrote (18834)	9/21/2004 5:09:39 PM
From: loantech	Respond to of 110194

Go Gold.

To: russwinter who wrote (18834)	9/21/2004 5:40:59 PM
From: mishedlo	Respond to of 110194

Forget about a recession (at least as commonly defined) now. A penetration (even if brief) through 4.00% ten year (lead by Asian CBs trying to prevent a USD collapse) is going to do nothing but set off another wave of refi and consumer borrowing for XMAS, balloon the trade imbalance towards $200 billion a quarter, build another round of unneeded spec housing, and cause even more maladjustments and inflation. Looks like the next commodity run is being green lighted by the irresponsible Asians and Fed, lead by energy and metals. The Asians are going to be pushed to the wall on "vendor financing" our goods and energy purchases. The commercials are near record long the depressed grains, so it ought to join the fray as well. After the summer hiatus, watch for a renewed round of Purchasing.com pricing increases on the thread. This run will have a big speculative element as the funds (over $100 billion now in managed commodity funds) have largely gotten out during the MoP talk phase. This time they really can blame speculators (in reality flucht in die sachwerte: flight to real goods, crack-up boom behavior) for some of this price move. It won't be your cold freezing ice that will end this ridiculous economic cycle, it will be hot fire. Yes happy to have concluded this Israel nonsense (I hope). I was under multiple attacks for no reason. As for "A penetration (even if brief) through 4.00% ten year (lead by Asian CBs trying to prevent a USD collapse) is going to do nothing but set off another wave of refi and consumer borrowing for XMAS..." I am not so sure. In fact I think not. Brian Reynolds at Minyanville told me that the universal opinion of bond managers was that they were surprised that it has not happened already. He now seems to think that yields will be forced lower and IF 3.91 area gets take out we see a re-test of the last low at 3.63 or whatever. So far, falling refis have done nothing to spur refis. That was his viewpoint and aparaently the viewpoint of most bond managers. Here is mine: I am not surprised that refis have not occurred. 1) People more and more have gone to adjustable rate loans 2) Housing is stalling in some sections of the country 3) What equity is there to pull out if housing prices stall? 4) The consumption binge just might be stalling on its own accord. I doubt that rising oil prices and medical costs are encouraging consumers to buy more junk. 5) Is there anyone that wanted a new car or home improvement that has not already acted? As for rising gold and silver and some commodities we seem to be in agreeement. I lost on corn, should have been in OJ. Probably made in lumber what I lost in corn so that is a net wash. As for homes. Starts are stubbornly high BUT.... inventories have risen from 3 week supply in Orange County to a 7 month supply if I recall correctly. Prices have stalled in many areas and building permits are down 5%. We will see if that matters but at some point rising interest rates will. I will say this emphatically... The long bond does NOT see the inflation problem you do. In addition virtually NO economist sees a recession coming. Everyone sees this "soft patch" and the higher the FED hikes before stalling, the worse things will get. The shocking thing to the FED will be the lack of response when they do reverse course next time. Can you say pushing on a string? When corn and soybeans were rising mercilessly you and other were screaming inflation. I hear no screams of delation as soybeans have fallen 50%. Soybeans aand corn are now at low levels. Oil is high, but realistically how much of that is: a) inflation b) geopolitical concerns c) an uncontrolled boom in China we have no control over d) peak oil The world will not slow down for the benefit of the US no matter what the US wants. We can not control b or d unless we raise interest rates to preposterous levels. We only have limited impact on c IMO. Right now the simple bottom line is this: Everything China Needs Creates Inflation Everything China Produces Creates Deflation IMO few of those PPO prices have been passed on. Inflation pressures are subdued. Unlike the 70's there are no wage pressures, unions are not in charge, many (but not all) PPO hikes are not passed on, we are still losing jobs, real wages are declining, and economic stimulus is wearing off. I do not believe even Greenspan understands the global economy and what impact that has on price pressures. The question at hand is this: do gold and silver rise in a deflationary environment? I believe they do. Eventually all fiat currencies head to zero. Every one has so far given enough time. Gold still survives. Europe which like Japan always SEEMS to be headed out of stagnant growth. Like the false starts of Japan after its deflation set in, not one of them has succeeded. Europe has an even bigger demographic time bomb than the US. So if Europe and Japan are not the answer what is? China is still pegged to the US$ and we are begging them to not do so. Well they will take our advice on THEIR timeline. When they chose to de-peg from the US$ we will no longer want them to. If China is accumulating gold (as I think they are), a collapse in the US$ and losses in US treasuries they suffer, will be more than offset by the rise in the price of gold, IF they accumulate enough. No worry of that for now. Party on dude. Mish