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

To: zonder who wrote (16204)	11/18/2004 11:55:06 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Stick around a little more and see for yourself just how far from "overwhelming consensus" we are :-) This board is hardly mainstream concensus IMO flattening of the interest rate curve is bad for the banks and they are not able to hedge for it. Flatteneing of the curve will reduce profits and profit expectations. Well it should do the latter but expecations for record profits in this tightening are wildly pervasive. Also doubling of short rates is bad for the economy and the banks are part of economy. I disagree. Short rates that are negative in real terms doubling and STILL remaining negative in real terms is not bad for the economy. I disagree that real rates are positive. They are flat at best (looking ahead IMO) Mish

To: zonder who wrote (16204)	11/18/2004 12:55:15 PM
From: ild	Read Replies (1) \| Respond to of 116555

What about many trillions of fixed debt that was swapped into floating rates? Remember when Bill Gross balked at GE when they floated long term fixed bonds and immediately swapped them into floating rates? Increased FF rates is a drag on economy. Yes 2% Fed funds are still very low, but they are much worse than 1% FF. Another question. Do you know how much of banks equity is in form of real estate? I heard that this percentage is very large.

To: zonder who wrote (16204)	11/18/2004 1:12:41 PM
From: ild	Read Replies (2) \| Respond to of 116555

Here's 6 month old chart. If you are bearish on RE prices then banks are shorts. idorfman.com Lastly, the final chart is conceptually borrowed from Paul Kasriel at Northern Trust. Paul estimates that total bank exposure to mortgage debt is near 60% of total assets when bank investments as well as loans are included in the picture. Again, we cannot overstate the meaning of inflated real estate values to the US economy and financial system. From Contrary Investor 04/15/2004