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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 (25865)	2/4/2005 3:42:51 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Fri Feb 04 2005 15:32 trotsky (humble1) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i've seen a few comparison charts not too long ago that showed that the RE bubble in several Western nations is already worse than Japan's was by several metrics. we only THINK that Japan's bubble couldn't be bested because all we remember is how the Imperial Palace was supposedly worth more than all California real estate put together. but i always thought that story was an exaggeration for illustrative purposes, since the emperor never really put it up for sale. Date: Fri Feb 04 2005 15:29 trotsky (Hambone@fundamentals) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved hehehe....oh well, it sure helps to be aware of them...i never disputed that. fundamentals for the general feel of how they're likely to evolve in the future, and technicals for the timing of the requisite investment actions. one of Prechter's EWT letters had a remarkable look at how little e.g. the stock market and economic fundamentals have correlated over the past 3 decades...check the place during one of their free weeks and download all the EWT papers. very interesting stuff. Date: Fri Feb 04 2005 15:24 trotsky (Romanov@DROOY) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved well, i seem to remember that they announced this program when the Rand was trading above 10:1 - are they really still at it? haven't heard anything lately, so i'm not really up to date w.r.t. this, but then i think DROOY has other, more pressing problems to address at its SA mines anyhow. the Argonaut deposit COULD become interesting at a much higher PoG, that much is certain. but it represents an enormous engineering and financing challenge. Date: Fri Feb 04 2005 14:37 trotsky (Pit Yorkie) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "IF .. IF .. the yield on th 30 T bill is going to 3 per cent IMHO you will be able to make a lot more money ( and taking a lot less market risk too IMHO ) by being in the stock market." this is erroneous. if it were true, the Nikkei would have traded at 80,000 points when the JGB yield hit its all time low of 0.48% in 2002. but it actually traded at 7,500 points, almost 70% BELOW the all time high achieved 13 years earlier ( when incidentally, JGBs yielded over 8% ) . in a deflationary era, bond yields can decline to next to nothing, while stock prices collapse. you make the mistake of thinking that the so-called 'Fed model' invented by Ed Yardeni is applicable here. it isn't. it only works during the disinflation era, which has ended nearly 5 years ago. the cycles and their effects on stocks and bonds: 1. reflation: stocks go up, bond yields go up too. 2. inflation: stocks go down, bond yields go up. 3. disinflation: stocks go up, bond yields go down 4. deflation: stocks go down, bond yields go down as well. how far below its all time high is the SnP index, and how far from a new all time low is the 30-year bond yield? there's only one scenario that allows for the bond yield to go to 3% - a flight to safety, caused by plunging asset prices ( i.e. those of stocks and real estate ) . Date: Fri Feb 04 2005 14:29 trotsky (strat) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i know, just kidding. i'm not saying there's no use for the options pricing formula. note though that few traders in the sense they were referred to here rely on such models in any way. it's a different cup of tea when you have a trading desk that constantly needs to dynamically hedge naked derivatives positions - you have to use some sort of criteria to do this, and that's where the mathematics of options ( inter alia ) can be important. use of the model does however not make one a good trader, and this is where the LTCM example comes in. those dudes relied on models that ultimately were grounded in an article of faith, namely that i-rate spreads would continue to converge. the market just showed them that sometimes the opposite of what you expect can happen, and that liquidity generally dries up just when it is needed most. no mathematical model can account for greed and fear, and those are still the prime market movers.