Date: Tue Feb 01 2005 12:03
trotsky (homestake) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"the conference board's index of leading indicators increased 0.2% m/m and 1% Y/Y in December. the largest contributors to the improvement were a stronger stock market and confidence"
now, leaving aside the fact that the leading indicators declined in the previous 5 months, this is as self-referential as it gets. consumer confidence is a coincident indicator of stock market strength - which in turn is a function of excess liquidity more than anything else, considering its valuation.
but that huge decline in mortgage refi applications should worry everyone who depends on the related credit bubble, since it has happened with interest rates on mortgage loans remaining close to multi-decade lows. this actually goes to show that the widespread perception that the housing market can't soften before rates head significantly higher could turn out to be wrong. it might die of exhaustion instead.
if so, what happens to all the non-wealth-generating activities that have sprung to life on the back of this credit bubble? they will be liquidated, which is good for the economy's very long term health, but will be a real pain in the medium term. since it will bring forth the state's meddlers, medium term may be too generous an assessment. the distinction may turn out to be between long and very long term.
looking at the key European data presented like industrial production , orders and price trends, it looks like the great reflation experiment is petering out globally. interestingly, confidence data also seem more aligned with the stock market than with reality - a bit surprising considering the lack of public participation.
Japan looks like it tried to bottom out and failed, and China looks like a bubble fixing for a soft crash landing.
i'd say it looks like the shelf life of the rate hike cycle is severely limited - although a few more months of data would be helpful in firming this opinion up a bit. still, maybe not, in view of the consensus ( which as far as i can tell is '2005 will look exactly like 2004' ) .
Date: Tue Feb 01 2005 11:31
trotsky (Bizarro@government and banks symbiosis) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
you're quite right about the nature of this relationship - it's pretty obvious when you have a central bank directed fiat money system in place.
and i also think Warburton has a point, there is a common interest, i.e. motive, for trying to influence markets.
but that's different from alleging a massive conspiracy, supposedly involving a plethora of actors and having worked for decades undetected, without a single ( NOT ONE ) whistleblower ever coming forward.
now, does anyone really think that the day-to-day movements in the gold price ( a few dollars up or down ) can be explained by the workings of a mysterious 'cabal'? this can in fact be easily disproven, by proving that the major force in the Comex gold market ( i.e., the price setters ) are the big hedge and commodity funds, and NOT the commercial hedgers ( which would be the investment banks ) .
GATA has been going on about the COMEX for years - in those same years, the big speculators went from massively net short ( at the tail end of the down trend ) to massively net long ( at the tail end of the subsequent up trend ) . are we to believe that there has been a switch of cabal identities?
you don't have to believe that in order to believe the more general concept of the issuers of fiat money seeing gold as an enemy - and doing what they CAN do to keep that market tame.
but that's also a crucial point, namely WHAT is it that they can do? and the answer is: basically nothing. no-one is bigger than the market...they may be able to influence the market for a short period of time, by e.g. announcing official gold sales, but can they stop a primary trend?
no, no and no. the late 60's, and the entire decade of the 70's proved that beyond the shadow of the slightest doubt. intervention in the gold market was quite open back then...first the London gold pool, and then the loudly trumpeted sales by the IMF and the US treasury in the 70's. they utterly failed, as evidenced by gold's 2,500% ( !! ) rise in that decade.
now does anyone think that the current crop of would-be central economic planners is any more capable than the bureaucrats of the 70's? bwahahaha...
Date: Tue Feb 01 2005 11:06
trotsky (frustrated@Fed-speak) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i don't THINK the long end can be 'scared into submission' as you've put it, although it seems they would like for that to happen.
the reason is that the threat of bigger rate hikes only brings the coming collapse of the real estate bubble one step closer - and with it, the aforementioned 'flight to safety'. at least i believe that's how the market will come to see it, although it would be foolish to rule out an initial reaction to the contrary. iow, i've no idea about the short term, but i feel quite confident about the long term outlook in this case.
Date: Tue Feb 01 2005 11:00
trotsky (Earl Grey@homebuilder stocks) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i note this is the equivalent of the stocks of Juniper Networks and other optical networking device companies hitting new all time highs well into summer of 2000 in spite of the fact that the business of their main customers already stunk to high heaven.
if one is willing to look closely, one notices that this auto-pilot buying of builder stocks on falling t-bond yields is equally built on sand ( the sand, as ever, are the capitulating shorts ) .
while demand for housing has begun to slow down, builder inventories of undeveloped land and unsold homes have exploded. note that these ionventories are invariably financed on credit. the financial ratios in the requisite balance sheets look scary enough, and will look a lot scarier once the prices of those inventories begin to fall.
think Japan, only worse.
Date: Tue Feb 01 2005 10:37
trotsky (Bleuler@GATA) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
now this is new to me: GATA, the association that alleges that there's a conspiracy afoot to suppress gold prices, has 'anti-war Libertarian' credentials?
and the fact that they have been 'scorned' by the machinery of the State on that point explains why they fail to employ logic?
could you please point me to the evidence proving these 'anti-war Libertarian' leanings of GATA? i never really liked that tin-foil hat outfit ( well, its chief attack dog Murphy anyhow ) , but if they really are anti-war Libertarians, i might change my mind.
how about we ask the chief silver conspiracy theorist of our time, Ted Butler, about his views on the Iraq war? Ted?
Date: Tue Feb 01 2005 10:26
trotsky (frustrated@bonds) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
there's always something that helps them, though i note that no-one has as of yet fled agency debt. spreads on corporates and junk also haven't budged much, so it's not yet a 'flight to safety' ( that will however still come, imo ) .
generally speaking, what is happening is perfectly normal in a deflationary era. the market is discounting future disinflation/deflation in advance. the bond market 'knows' that the Fed's rate hike campaign will bust a few bubbles by mistake, and is trading ahead of the main event.
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