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

To: mishedlo who wrote (12228)	9/24/2004 12:38:14 PM
From: orkrious	Respond to of 116555

Mish, I sent Brian Reynold's piece this morning to Heinz. here's what he said: yes, they're chasing yield, and more importantly, they're complacent. what was the BEST time to buy both corporate bonds and equities? when these guys were full of fear, cutting off financing in the junk bond markets. when were credit spreads as low as they are now? just BEFORE the Asian crisis. iow, when these guys get so overconfident as to drive spreads down to ridiculous levels, it's time to get very worried. also, the article makes it sound as if the world were chock-full of equity market bears. this is not true. the Wall Street promoted expectations for 12 month returns from stocks range from between 15 - 30% - way ABOVE historical norms. and in fact, the high oil price is not taken seriously by anyone. first of all, the consensus is, and always has been, that not only are current prices not sustinable (i.e. are most likely to fall), but even higher prices can be ruled out completely. that has been the refrain all the way up. the same can be heard from the Fed: it's a 'transitory energy price problem'. you keep hearing excuses...like: 'it's not at an ATH in inflation adjusted terms', or the utterly ridiculous 'it's not as important to the economy as it once was'. also, betting on yet another revival of the refi craze is a fool's game imo. i DO expect treasury bond yields to continue to fall, but i think the housing mortgage credit bubble is exhausted. if all it took for that bubble to revive were lower rates, Japanese real estate prices would have gone up instead of falling by 80% over the past decade. all assumptions made on the narrow 2000-2003 post equity bubble experience in the US are doomed to be wrong imo, since they extrapolate a narrow window of history without due recognition of the much more pertinent historical experiences of other post equity bubble periods.