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

To: Kaena™ who wrote (29438)	3/27/2005 11:29:02 AM
From: LLCF	Respond to of 110194

<I argued that as the "viscious-cycle" dollar slipped in value and dollar based commodities responded by rising in price, surplus nations such as Japan would eventually have less "surplus" money to manipulate/buy US dollar/treasuries. (Just as is happening today with oil, gas, coal, copper, steel, etc.) > Good point... surplus' going to commodities instead of treasuries? <Debts must be repayed or chaos will reign and repayed they will be - in devalued fiat, thus "Stagflation", "Depressionflation," or some such phenomenon. And jobs must be created even if subsidized by "helicopter money" to pay those debts.> I think some forget... the fed has already set it in it's mind that it's OK to buy any asset. DAK

To: Kaena™ who wrote (29438)	3/27/2005 4:20:02 PM
From: gregor_us	Respond to of 110194

Kaena, My View Has Been That The Complex (The System) Initially moves into a Deflationary mode when, as you put it, the End Game begins. The reason for this is that, behaviorally, I think market participants will act in such a way as to correspond, to their best ability, to history. In other words, I think a Recession will develop initially and participants will respond to it as though the government, and its debt instruments and money, are sound. More sound than most other investments. Something I've had to become more aware of in my own thinking and that I've seen increasingly in others, is a penchant for the dramatic, when trying to figure how this all plays out. How the End Game plays out. How it turns, when it turns. For myself, I've backed off speedy, panic-driven scenarios. I agree with your view as to the eventual outcome. The reason , for example, that we cannot have an outcome here IMO as what happened in Japan (I use the Japan example as a proxy for Deflation) is that Americans have zero net savings in the aggregate. The Complex (The system) will IMO eventually turn as you state. But not before a TextBook-like recession unfolds first, with a flight into T-Bonds. That flight may be realatively brief in its development, before it transforms, into what I believe will be a frightening Revulsion for US govt paper and the currency. But my view is that, in history, people try intially what has worked before. Even for a short while. I think the no-brainer trade is to sell bonds, and buy commodities. It's simple and possibly simplistic, but will require stamina to get through what will no doubt be sharp and stunning reversals. Many versions of this trade are already very, very crowded--and will probably become moreso. So, reversals will be heavy-duty. I own some gold, silver, and gold stocks. Though I'm not "happy" about owning them, I own them because of what I think people will eventually be forced to do, when The Complex reaches maximum stress. They'll have to buy what I already own. Near term, I see this week's Fed Drama as one of those set-ups however that eventually pushes T-Bonds higher in prices (lower in yield). Lots of people throwing around the Stagflation word (and I agree that's what's coming) but I think The Complex will move initially down the Deflation track. I mean, it will try that out. LP

To: Kaena™ who wrote (29438)	3/28/2005 11:32:19 AM
From: Rarebird	Read Replies (1) \| Respond to of 110194

<<As interest rates rise, CREDIT EXPANSION induced housing/consumer bubbles collapse, fed, state, county and corporate bond debt, GSE mortgage backed secuities debt, and all other leveraged malinvested dollar speculations collapse, Japan-Asia/Europe/Middle East would need their money back at home converting vast dollar holdings back into domestic currencies/commodities/resources.> It's interesting to speculate how (and when) the break point will come: Will it come when a large enough part of the rest of the world realizes that the US has no intention whatsoever to stop or even slow down its accelerating credit expansion? Will it come when Americans themselves lose confidence in their stock and/or bond markets and start to sell, causing foreigners to panic sell? Will it come when millions of people who have been borrowing up a storm for years finally take a look around and stand astounded by what they owe and the weekly cost of being so deeply indebted? They often turn, en masse and on a dime, when that happens, the consumer finally does stop borrowing.