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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (22090)	11/20/2004 2:04:02 AM
From: Cogito Ergo Sum	Read Replies (1) \| Respond to of 110194

I dunno Yiwu, I think Europe may already start to buy US$. think about this... Exactly. now you can think like a Chinese<g> Who says Europe thinks like Americans ? a regular Wong.... ;o)

To: RealMuLan who wrote (22090)	11/20/2004 2:17:57 AM
From: mishedlo	Read Replies (3) \| Respond to of 110194

Mish: If this recession is fought, next up in deflation just might be Europe. Followed by the US. I call it rolling deflation. Yiwu: Now you get me. How could high energy and raw material price lead to a deflation? Mish: The same way it did in Japan Oil has been rising for years yet Japan has been in deflation for 18 years. They said land prices would never fall in Japan because there is so little of it and so many people. Well land prices have fallen steadily for 18 years in Japan if you can imagine that. Look at prices of PCs, appliances, TVs, cell phones, ect all falling are they not? You expect prices of HDTVs to go up or fall from here. Cell phones? Cars? What? Inflation here manifested itself in housing. A housing bust will cause deflation here just as it did in Japan. Rising energy prices are very hurtful. Consumers will have less money to spend on other things if heating bills and gasoline keeps rising. At the margin there will be no money to buy stuff. We already have oversupply of cars TVs etc. Demand drops and so will prices. Prices of houses in the UK falling for 5 straight months. CPI just dropped in the UK too. If it can happen there it can happen here. How much overcapacity will there be in China if US consumers give up the ghost? What will that do to prices if we do? Will prices go up or down? A very few of us (Heinz and myself) and a couple others think oil is deflationary - in THIS environment. It was inflationary in the 70's but has actually had little affect on prices in this environment now. Already US GDP forward estimates has been reduced by 3/4 point in the US and 1/4 point or so in Europe. Europe on verge of recession right now. Higher Euro, slowing world economy, and fewer exports will do it. I do not expect prices of goods to rise in Europe. Inflation in the UK is 1%. The US feels it a bit more because of falling US$ but currency has fallen 30% and US inflation is what? Some think inflation is way way higher than reported and so do I because of housing, but outside of that it has not been that bad and much of it has nothing to do with the falling US$. Medical costs for example. Rising like mad, but you can not tell me that is because of a falling US$. I do not buy it. Eventually housing will crack and that will end this "crack up boom". The sign are there already. Money supply is falling and housing is showing lots of stress in many areas. It took 5 hikes to cause housing to fall in the UK, one more here will do it IMO. If consumer spending falls off the floor this christmas there will be tons of lower prices in January. We will see if it happens. Keys are housing and jobs. They go and we get deflation IMO regardless of how high oil or copper or coal goes. Mish