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

To: ild who wrote (22657)	11/30/2004 3:03:04 PM
From: dara	Read Replies (1) \| Respond to of 110194

does anyone know someone like that? Some on this board have said that they have sold gold stocks and are buying GLD. See post 22129 and 22313 as an example. FWIW

To: ild who wrote (22657)	11/30/2004 3:46:45 PM
From: ild	Read Replies (3) \| Respond to of 110194

Date: Tue Nov 30 2004 14:51 trotsky (Stevens @ housing) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved this is imo way too simplistic an analysis - it reminds me of the argument that could be heard in Japan anno 1989, which was "Japanese house and land prices can never come down significantly, since both are in short supply". as an aside, Japanese demographics were 10 years ago where US demographics are now. Japanese land prices have been falling for 13 years in a row now, and the compound price decline amounts now to about 80%. blaming demographics for the bubble ( and it IS a bubble - proof are the facts charted on this site which looks specifically at the San Diego bubble: piggington.com - as can be seen there, neither population growth, nor income growth, nor in fact any other of the myriad excuses used to explain how prices came to rest 85% above trend are satisfactory. there remains only one logical conclusion - it's a bubble ) is not good enough imo. the bubble has been egged on by way too easy credit and the peculiar moral hazard introduced by the activities of the GSEs - which with their willy-nilly buying of mortgages without regard for the underlying assets or the creditworthiness of the borrowers allow the industry to extend credit on ever more irresponsible terms. by the way, i have heard this demographics argument before - at Nasdaq 5000. it was explained to me then that it was completely immaterial that the average p/e of the Nasdaq firms actually making a profit had risen to about 300 - the retirement money of the baby boomers would definitely not only help to sustain such absurd valuations, but would actually increase them even further. we know how that one turned out. and so it is with the 1/2million dollar hovels that were worth a mere 150,000 only a few years ago - they have become unaffordable for the bulk of the potential buyers; their price has increased, but their VALUE has not; the price increase is far above anything that could be justified by the available data, including inflation; and it all rests on the biggest EZ-credit inflation the world has ever seen. this latter point is probably the most crucial - the expansion in mortgage credit is simply off the charts. since the 1950's, bank exposure to mortgage assets has increased from 10% of bank assets outstanding to over 60% - which is to say that once this bubble pops ( it has already begun as can be gleaned from inventory and sales data ) it will leave the banking system in tatters - just as has happened in Japan. and that in turn will very likely be good for treasury bonds - and bad for all other debt instruments.