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

To: SouthFloridaGuy who wrote (13551)	10/16/2004 10:15:10 AM
From: Tommaso	Respond to of 116555

>>>> fully expect US T-bonds to be the best performing investment over the next two years.<<< Nothing wrong with shorter maturities--bills and anything maturing in three years. Those who buy and hold anything over ten years risk seeing their wealth confiscated by inflation. The longer the worse. And efforts to prevent or control inflation by raising interest rates would, as we all know, mean a radical reduction in value of the long bond.

To: SouthFloridaGuy who wrote (13551)	10/16/2004 10:55:43 AM
From: glenn_a	Read Replies (1) \| Respond to of 116555

LongIslandGuy. It seems like we concur on strong deflationary headwinds and the possibility for a devaluation (collapse?) in the US$. If one has the above perspective, is US T-bonds really the place to be? One, you have currency risk, and two, I believe it is possible that the US may have to raise rates even in a deflationary environment to attract sufficient funds to rollover existing debt. I certainly would rather be in US T-bonds that any of US tech stocks, GSE-issued debt, or say emerging market debt. But I share Russ's pessimism on US bonds in light of massive artificial demand from Asian central banks, and US$ vulnerabilities. [Late edit: And I agree with Tomasso that shorter maturities are definately preferable to longer maturities.] What's your thoughts on this? TIA. Glenn

To: SouthFloridaGuy who wrote (13551)	10/16/2004 11:42:46 AM
From: mishedlo	Respond to of 116555

Businesspeople from a wide range of industries all over China said in interviews at the [the Canton Trade Fair] fair that rising raw material prices in particular had been seriously crimping their profit margins. They painted a complex picture of commodities demand in particular, saying that their country's economy was still running very briskly, but that buyers were becoming resistant to paying steeply rising prices for some products and were deferring purchases. Emerging signs that Chinese companies are balking at high commodities prices prompted near panic in the metals markets this week. On Wednesday, copper and nickel prices suffered their biggest one-day drop in London trading in more than a decade. David Chen, the export department manager of Ningbo Jiekelong Valves Manufacturing near Shanghai, a large producer of copper valves and tubing, said that long order backlogs had disappeared in recent months. Some orders have been canceled, others have been filled and few new orders are coming in. "The price is very high, so they're not buying, they're waiting," he said. ------ The Tianjin Jinmao Corporation in northeastern China has raised the prices that it charges for caulking guns, shovels and stepladders by 25 percent to 30 percent over the last year for small customers, passing along the rapid rises in steel prices. But customers like Wal-Mart, Kmart and Home Depot in the United States and Obi in Europe have refused to accept any increases, said Sunny Yen, the company's vice president for sales, adding that Home Depot alone accounted for a fifth of Tianjin Jinmao's sales. "I like to say that Wal-Mart has every day a low price, Chinese steel every day has a new price," Mr. Yen said. "If I ask for a price increase, they will say, 'Either you have to accept the current situation, or we will take our business elsewhere.' " Rising crude oil prices have become a preoccupation for many companies in China, which relies far more heavily on energy-intensive manufacturing than wealthy industrialized nations do. "That leads to everything increasing in price - the gas and the plastics - so that makes it hard for us to keep the prices the same," said Zhou Hui, a sales representative for a local mirror manufacturer that uses plastic frames for its mirrors. nytimes.com

To: SouthFloridaGuy who wrote (13551)	10/18/2004 2:19:03 PM
From: michaelrunge	Read Replies (1) \| Respond to of 116555

>I fully expect US T-bonds to be the best performing investment over the next two years. LongIslandGuy, the problem with US T-bonds is that they are denominated in US Dollars, which are likely to get a haircut sometime soon. Why not hold foreign gov't bonds which pay better rates and have upside in the event of a USD devaluation? I worry about currency stability, and have tried to move out of USD denominated assets via the Everbank CDs and Templeton Global Income Fund (GIM) which pays (I believe) about a 5% dividend. The strongest period of its performance (ie, slope of rise, not duration of rise) from what I can see is the period in mid to late 2003 when the USD was falling in value. GIM went sideways for 2004 so far, but my bet is that it will do well in 2005 if USD falls again (if???).