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

To: gregor_us who wrote (24605)	1/13/2005 6:12:53 PM
From: mishedlo	Read Replies (4) \| Respond to of 110194

What is comical is that you fail to understand the argument. Personally I doubt Heinz has any treasuries. I do not have any either but make the same arguments. Japan has NOT intervened in the currency market and I believe I proved that yesterday. Brian Reynolds has followed the bond market for 20+ years and thinks domestic demand will pick up for treasuries. From where? I explained it already. There is a zillion $ bond market out there. Bond managers balance assets. Right now they are chasing yield. Anything damn thing with a spread to treasuries. There is a TON of demand if and when agencies are sold to buy treasuries. Bond managers buy bonds. That is what they do. If they do not like agencies they sell them and buy something else. What else? YOU TELL ME! Just what the F is so complicated about this argument? There are also plenty of people that see a weakening economy and like to shift from stocks to treasuries. Just what is so FN hard to understand about that argument? I am not asking you to believe it, but how the F can you not understand it? Now, if we are repeating ourselves, what about every person on Russ' board, not to mention 5 recommendations a day about people writing the death knell of bonds. The argument is the same.... every FN day What IF Japan sells What IF China sell What IF the man on the moon eats pineapples at sunset Well first off 1) What makes anyone think it is in Japan's best interest to sell? Sell to buy what for Christs sake? Japanese bonds at 0%? Quite simply the argument has NOT been made. What about this do you people fail to understand: JAPAN DOES NOT WANT THEIR CURRENCY TO RISE. 2) If Japan sees value in treasuries what the F do you know that they do not? Please enlighten us. 3) What guarantee is there that someone else will NOT buy IF Japan sells? 4) What makes you think that Europe will not be intervening in the US$ or treasuries to make up for any lack of demand from Japan? Are they not bitching to high heavens? And round and round and round we go Look - If treasuries are a short, then short the damn things But... don't you think there are better things to short... Like junk, or stocks, or the US$ I keep posting the COTs over and over and over. There is an ENORMOUS amount of people shorting treasuries. No one understands the possibility of a flight to safety. No one understands any of the other argumensts either. Not a single person on the planet apparently Not you either. Well I take that back. Heinz, myself, Plunger, Lacy Hunt, and that post yesterday from some billionaire that recommened treasuries. Perhaps that is how he got to be a billionaire. If treasuries are a short, then short the damn things. Mish

To: gregor_us who wrote (24605)	1/13/2005 10:07:58 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

My point is as follows: Heinz thinks he is describing a bond market that is classically set up for further gains, based on sentiment. However, what he is unwittingly describing is a bond market that is seriously distorted. The negative sentiment towards the bond market is rational--however, the sentiment has been produced by the distortion, so as Heinz correctly points out, that sentiment is doomed to be ever frustrated (for now). But he never grants the distortion. That's the blind spot. You want a blind spot? Here is the blind spot. You say you understand my argument but did not address a single question that I raised. Not a single one. You sit back and play both sides of the issue quite often. I would like to see you address some of the questions I asked. There is a zillion $ bond market out there. Bond managers balance assets. Right now they are chasing yield. Anything damn thing with a spread to treasuries. There is a TON of demand if and when agencies are sold to buy treasuries. Bond managers buy bonds. That is what they do. If they do not like agencies they sell them and buy something else. What else? YOU TELL ME! Just what the F is so complicated about this argument? .... 1) What makes anyone think it is in Japan's best interest to sell? Sell to buy what for Christ’s sake? Japanese bonds at 0%? Quite simply the argument has NOT been made. What about this do you people fail to understand: JAPAN DOES NOT WANT THEIR CURRENCY TO RISE. 2) If Japan sees value in treasuries what the F do you know that they do not? Please enlighten us. 3) What guarantee is there that someone else will NOT buy IF Japan sells? 4) What makes you think that Europe will not be intervening in the US$ or treasuries to make up for any lack of demand from Japan? Are they not bitching to high heavens? Your counter seems to be "where is the money going to come from" and "it's just a distortion from Japan" Well where the F is the money going to come from to buy copper or gold or houses or anything else? What pray tell is the answer to that? Tell me, right now point blank where the money is going to come from to buy ANYTHING? Am I supposed to believe that China has internal demand to suck up the world’s commodities supporting the price of copper, iron and everything else and there is no money for anyone else to buy anything including treasuries? Answer that paradox please! You criticize heinz and I for suggesting that treasuries will bought on the argument there is no money but supposedly there is money for everything else. Tell me why there is money to buy gold or silver or copper if there is no money for anything else. Tell Me! Is it distorted? Hell yes it is distorted and neither Heinz or anyone one else said otherwise. But in the fantasyland of everyone here, it is 100% ok and there will be money to buy gold and silver and copper but no money to buy anything else. If housing is going to crash who the F needs copper? If cars are going to crash who the F needs steel? If there is no money to buy anything then aren't we talking 100% DEFLATION? Now, in deflation do or do not govt bonds tend to rise or fall? Housing crashing is the #1 delima that all the inflationists have yet to explain. EXPLAIN INFLATION IN THE CONTEXT OF A HOUSING CRASH AND ALL THE LOST JOBS THEREOF! You can NOT do it. Please tell me why we need so much copper, steel, or aluminum in an auto/housing crash? Please remember that China is a steel exporter. If there is no money who are they exporting too? If we are losing jobs in a housing crash please tell me who has money to buy what. Am I supposed to believe that Europe and Japan go on a huge buying spree here? Tell me! Tell me that when that crash happens we have inflation. Tell me! If you can not answer that then you can not explain why treasuries are a short. In the fantasy land world here treasuries collapse houses collapse stocks collapse copper goes to the moon gold goes to the moon but there is no money for anything else including treasuries I guess distortions are only one way and there is money for copper but not treasuries Please get real PS: Copper bulls better damn well hope that the FED keeps interest rates low or copper is a huge short. If it is OK for copper bulls to be long on the "distortion" why is it wrong for treasury bulls to be long on the same distortion? Answer that. Mish

To: gregor_us who wrote (24605)	1/14/2005 2:49:47 PM
From: mishedlo	Respond to of 110194

As I asked several weeks ago, "with what money?" will Americans support their bond market? Americans do not have the capital now to transfer to the US treasury market. So...they're going to have it later, in the midst of a real estate and stock market crash? This is comical. Really. LP Response from Heinz: the answer to 'with what money' is actually quite simple. institutions of all kinds, pension funds, insurance companies, banks, have vast funds that could be shifted into bonds. in the case of pension funds and insurers e.g. there has been a drastic change in their asset mix over the past few decades - they have now far larger exposure to equities than they used to have. it's imo quite reasonable to expect that the pendulum will swing the other way when the economy and the stock market weaken again. the banks otoh have over 60% of their assets (as i explained in the post from which the quotes were picked ) in mortgage related assets now - also a huge shift in their asset mix that has taken several decades to get to where it now is. well, i don't think there's disagreement that we have a housing bubble that will one day pop - and when that happens, the banks will also recalibrate their asset mix. they'll run for the life-boats, and US govt. debt will no doubt be their life boat of choice. allow me to also point out that i've been among the handful of bond bulls for quite some time now - and so far, the onus of proof is on the bears, not the bulls. hello? is anybody wondering how come that the bond market is only a few points away from its ATH's?? oh yes, it's of course all 'manipulation'. nevermind that no market manipulation scheme has ever worked out...and nevermind that this market is simply far too big to be successfully manipulated even in the short term by anyone. of course, i will also readily admit that i COULD be wrong - the probabilities favor imo my bond bullish scenario, but there are of course potential pitfalls, and i always stress what they are. the major wild card is the dollar - a full-blown dollar crisis (i.e., a crash-like move in the currency) would likely crash the bond market as well (note though that as long as the dollar declines gradually, the bond market seems not unduly concerned by its weakness, on the contrary). what also worries me is the fact that treasury debt average maturities have come down so much in recent years - this makes it necessary to roll over a large amount of debt quite frequently, and that could become problematic at some point. as for Japanese savings, one mustn't forget that the private sector savings rate in Japan has a counterweight in the form of the largest industrialized nation government debt (as a percentage of GDP) . iow, these savings have already been wasted via government spending. also, this large govt. debt means that the supply of bonds is quite large as well. and yet, bond yields have declined for a very long time in Japan. anyway, the central question seems to be how it may be possible that US domestic demand for bonds could counter-act foreign selling of bonds (which by the by has yet to occur - this is not to say it won't ever occur, but it hasn't yet) suffciently to keep the bull market intact, well it's simply that money invested elsewhere is likely to shift into bonds. in fact, once assets like stocks and real estate begin to deflate, it is pretty certain that that will happen. the bond bears by the way are also regurgitating their arguments ad nauseam, to borrow a phrase from the writer of the below post. but they've nothing to show for them yet. even if a fairly large correction were to occur from current levels, it would take some doing to break the secular up-trend from the early 80's lows. until that channel breaks, the bull market is technically intact as well. ======================================================== Mish post.... From where? I explained it already. There is a zillion $ bond market out there. Bond managers balance assets. Right now they are chasing yield. Anything damn thing with a spread to treasuries. There is a TON of demand if and when agencies are sold to buy treasuries. Bond managers buy bonds. That is what they do. If they do not like agencies they sell them and buy something else. What else? YOU TELL ME! .... There is an ENORMOUS amount of people shorting treasuries. No one understands the possibility of a flight to safety. No one understands any of the other argumensts either. Not a single person on the planet apparently ...... Well I take that back. Heinz, myself, Plunger, Lacy Hunt, and that post yesterday from some billionaire that recommened treasuries. Perhaps that is how he got to be a billionaire. =============================================================== Heinz reply to that post by me: this is the crucial point - the potential flight to safety. and considering how strong the bond market ALREADY is, in spite of a succession of Fed rate hikes and the threat of more to come, we may actually get quite big move when flight to safety becomes a necessity. =============================================================== My comment today: That is where both Heinz and myself have proposed the money comes from. I hope the question has now been firmly addressed. I know I addressed this "where" question before personally, many times in fact, yet you act as if it was never answered. How many times I have talked about flight to safety and shifting mortgage money to treasuries? Probably too many to count. It was that "comical" reference to something I thought I explained many times in fact. In addition to that "comical" reference, I felt there was a personal attack on Heinz. That combination set me off. You do not have to agree with the viewpoint expressed above (and obviously you do not) but the viewpoint expressed by myself and Heinz is surely NOT "comical". Seriously, and in all honesty, which viewpoint is more comical (A:there is no chance of money flowing into treasuries in a downturn, or B:the explanations given many times over and presented again above)? That said, I am going to apologize a second time for my tirade because I could have debated this in a far more civilized manner. Mish