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

To: John Vosilla who wrote (24904)	1/18/2005 11:52:10 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

In any case I cannot fathom the true cleansing of debts and serious recession we need without a real backup in long term rates first. Perhaps it will be two recessions with the first one the shallow one and the one down the road 18-36 months the true bursting of the credit/housing bubble? The next recession can not possibly be shallow IMO. You underestimate the amount of credit, debt, money that will be destroyed if housing turns down. How can low interest rates possibly prevent that destruction of capital in a turndown? When we are as leveraged as we are what difference does interest rates make at all? All it takes is a trigger (or exhaustion) to send housing down. We have had 5 rate hikes you know. Your assumption that credit can not be destroyed at low interest rates sure seems false. If deflation could not happen at low interest rates, how did Japan have it at 0%? This is the key question: Exactly what is stopping us from having a credit crunch right here at 2.25%? Please state the case because I do not think you can. IMO If housing slows down it is all over. Perhaps you think that housing will not slow down here but you must agree that it possible. As for a series of recessions, I agree but the first one will be a doozie. If housing stalls, I doubt it can quickly be revived no matter how fast Greenspan cuts. Mish

To: John Vosilla who wrote (24904)	1/19/2005 9:06:39 AM
From: Ramsey Su	Read Replies (1) \| Respond to of 110194

Let us do a simple comparison. Assume we are back in 1989. Real estate was booming, no end in sight. As it turned out, it was the top and real estate prices did not do much for the next 3-5 years. Now look at 2004. We may not see any real estate appreciation for 3-5 years. The difference between 1989 and 2004 would be the amount of AMRs coming out of the fixed period within 3-5 years. What if all the AMRs were taken out around 4%. A max jump of 2% would take them to 6%. While 6% in itself does not sound all that bad, it is a 50% jump for those used to paying at 4%, especially if they were of the IO variety. It could be one ugly scenario.