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

To: gregor_us who wrote (19888)	12/30/2004 10:44:48 AM
From: mishedlo	Read Replies (2) \| Respond to of 116555

How many beeps shall we assign to the absence of foreign CB selling of US T-Bonds? No, I am not suggesting they have any reason to sell en masse--but, equally, is it reasonable to mark these holders as permanent? I think not. You can't throw a "so what", Mish, in the direction of foreign holdings of US Treasuries. Why can't I? They might sell stocks or they might sell bonds or they might do nothing or they might all go to gold and silver, or they might do nothing, or Japan might decide to seel while Europe decides to buy, or for that matter they might decide it is in their best interest to BUY MORE! As for how many beeps? Who knows. It seems like a reasonable number. How much did Japan's buying of the US$ change things. For all that intervention did they move the YEN 15%, 10%, 5%, 8%? Care to put a number on it? Why should treasuries be much different? Let's say Japan moved the YEN 10%. If you want to apply that to treasuries at 4% and say 40bps then fine. What I am suggesting is that it is not easy to modify the trend thru intervention. In the grand scheme of things 40 bps is not a lot either. Finally I do not necessarily agree that buying treasuries is intervention. They are looking for a place to park US$ and that is a vehicle that for whatever reason happens to be in the best interest of Japan (or so they think). You speculate (poorly IMO) that if Japan stops buying treasuries there will be no other buyers. I disagree. If there would be other buyers then perhaps Japan did not move treasury yields at all! A very reasonable figure would be about 25bps, and that is the one I will make right now. Mish

To: gregor_us who wrote (19888)	12/30/2004 11:00:48 AM
From: John Vosilla	Read Replies (4) \| Respond to of 116555

<Even if domestic demand in the US cranks hard in the midst of a severe economic downturn, it does seem prudent to continually ask what happens should the "float" of US Treasuries suddenly expand. It seems nearly impossible that in a housing led downturn that the USD would linger for long, before heading lower. That creates pressure.> You make some excellent points. The purchasers of all our debt will have their own problems as well causing some cashing out of US treasuries. Is it true something like 85-90% of all excess savings worldwide today goes towards the ballooning US deficits? In the stagflationary 70's we had slow growth, trade and budget imbalances, skyrocketing commodity prices and rising interest rates. Big differences this time are the huge debt levels of the US consumer and much more overvalued assets from record monetary and fiscal stimulus. The offset is the corporate sector has a much more stronger balance sheet now but will that be enough to make up for the negatives?

To: gregor_us who wrote (19888)	12/30/2004 1:36:17 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

THE WEEKLY GRAIN UPDATE ALARON: Hi, this is Tim Hannagan and it is Thursday December 30th and this is my weekly review. CORN: Looks to drop lower the first week of the New Year with a test of 1.97 basis March futures. With Bins busting with our recently harvested record crop and growers holding tight to cash sales in December, we look to see aggressive movement of corn for cash sales to pay holiday farm debt. Lower cash bids bring on lower futures. Demand is weak considering our large carryover stocks all leaving a mind set to come in next week to sell futures and see if new lows can be established. BEANS: After aggressive short covering ahead of year end funds remain a weak short. I look for only light farmer selling of beans for cash next week as growers continue to believe the Asian rust problem will leave better U.S. exports as South America struggles with massive shipping delays at harvest due to segregating the beans with rust. March beans look to see just enough cash sales to pull March futures back to the 5.25 to 5.30 area. WHEAT: Wheat sees our winter crop as safe next week from any severe weather threats leaving supply side concerns shelved. Demand, though promising long term, remains weak near term. Wheat looks to move lower in search of a price low enough to trigger demand. March looks to test 1.98. Pertaining to China’s economy. Stock trained people see their economy as coming to a sharp slow down effecting U.S. imports due to the recent slow down in economic indicators. This is false.. if you are going 85 miles per hour on the highway and spot a cop and slow to the posted speed limit of 65, are you coming to a stop. No, in fact you are at the speed to most effectively operate a car.. after being excepted to work within the guidelines of the world trade organization areas of their economy took off at break neck speed to capture their share of trade only to peak and come back to a level that will allow them to most efficiently trade. In regards to exchange rates or freight rates, did you buy less food by not going to the store when gas went from 1.50 to 2.00 dollar plus prices of course not. Food is a mandate in society and the cost of distribution has little to no effect on consumption. China has mandated more protein to be brought into their diet and with the U.S. as the sole port of origin to buy soy protein crops from until South American crops arrive in late February to March. Expect good Asian buying. Grain Markets are closed Friday. We are currently in some of the easiest trading grain markets in years. It is 70% technical and 30% fundamental application until spring planting begins. End.