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

To: zonder who wrote (15931)	11/16/2004 12:51:28 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

In short, treasuries might "yawn" at PPI number but that does not mean "the biggest increase in PPI inflation in 15 years" is not important. If oil stays right here will the biggest PPI decrease be significant next month? Mish

To: zonder who wrote (15931)	11/16/2004 1:21:57 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Heinz on interest rates Date: Tue Nov 16 2004 11:01 trotsky (frustrated@yield curve) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved one can say that generally, an inversion of the yield curve hurts those sectors of the economy the most that are most dependent on continued credit bubble expansion ( banks, housing, junk debt issuers,credit insurers, mortgage lenders, etc. ) . this is because an inverted yield curve hurts the profit margins of the entire 'borrow short lend long' game, which is essentially the game the banks play in the fiat regime. when their profit margins for newly issued credit get squeezed, it induces them to pull in and not lend as much as previously. one mustn't forget there are enormous leveraged positions at stake here, since fractional reserve banking tends to expand outstanding credit way beyond what is covered by deposits. so additional short term funds have to be borrowed all the time and must be regularly rolled over. as an aside, since the Fed has dropped ST rates to multi decade lows and announced for quite some time that those low rates were here to stay, US based debtors exposure to short term debt is gigantic ( for instance, many corporations are up to their eyeballs in short term commercial paper ) . so one could argue that the effect of hiking ST rates is magnified these days compared to more normal times. Date: Tue Nov 16 2004 10:15 trotsky (long bond) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i see the long bond's unchanged now, after a big PPI number. now why might that be? the reason is imo that the bond market is looking beyond this number and concluding that it might tempt the Fed to invert the yield curve ( which already looks a bit like Fallujah, i.e. flattened ) . this couldn't possibly happen at a worse time of course, with the housing bubble teetering on the brink and the economy in its weakest post WW2 recovery, which is largely a statistical artefact anyway ( i.e., if we discarded hedonic indexing, no-one would even think about calling it a recovery ) . the danger of letting a bunch of bureaucrats decide what short term interest rates 'should' be is about to be demonstrated again.

To: zonder who wrote (15931)	11/16/2004 1:41:00 PM
From: mishedlo	Respond to of 116555

Fed's Santomero sees period of moderate growth ahead By Greg Robb WASHINGTON (CBS.MW) -- The U.S. economy is on course for a sustained period of moderate economic growth, said Anthony Santomero, the president of the Federal Reserve Bank of Philadelphia. U.S. real GDP growth will remain in a range of 3.5 percent to 4 percent in 2005, Santomero said in a speech at a conference in Pittsburgh. Inflation should remain contained, he said, and job growth should average around 150,000 to 200,000 over the same period. If this forecast proves accurate, the Fed will continue to hike rates at a measured pace, he said. "If signs of price pressures emerge on a consistent basis," the Fed would need to consider quickening the pace, Santomero said. Conversely, if there are signs that the economy is struggling, the Fed may slow the pace of rate hikes, Santomero said.