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

To: Crimson Ghost who wrote (29475)	3/27/2005 11:11:30 PM
From: orkrious	Read Replies (1) \| Respond to of 110194

that guy is a genius. reading him sure makes me comfortable that I'm fully invested in mining stocks.

To: Crimson Ghost who wrote (29475)	3/28/2005 8:20:09 AM
From: russwinter	Respond to of 110194

This part of the Hussman comments are significant. Of course Libor is one of the key rates that ARMs are tied to. libor-loans.com Within the US, it's still pretty tough to find a bank CD yielding more than a T-bill however. This activity is probably just another form of the rampant speculation that the Wizards have allowed to get out of the bag: Now, when you see LIBOR rising sharply, you can infer that U.S. dollar deposits held internationally are getting scarcer. Importantly, this appears to be more than just Fed tightening. The spread between U.S. Treasury bill yields and LIBOR (the “TED” spread) has gone negative in recent weeks, so foreign interest rates on U.S. dollar deposits are rising even faster than domestic yields. Evidently, either foreign investors are eager to borrow dollars or fewer are willing to save them as time deposits. Meanwhile the depressed level of Chinese interbank rates implies that there is a relative glut of yuan deposits. Now, why would international financial market participants want to hold onto their yuan but get rid of dollar holdings (or even borrow them)? Hmm. While I don't yet anticipate an abrupt revaluation of the Chinese yuan (a change in the currency peg that would make the yuan appreciate, or equivalently, the U.S. dollar depreciate), suddenly all of this talk about China and other central banks wanting to “diversify” their holdings away from U.S. dollars seems to be having more bite. Anticipation of that type of event would tend to create just the sort of yuan hoarding and dollar borrowing that's reflected in Eurocurrency spreads (you want to borrow dollars if they're expected to depreciate, of course, so you can pay them back with cheaper dollars later). The risks of a shift in Chinese currency policy are heightened by the still-polite but increasingly palpable tension between China and the U.S. revolving around Taiwan's hints at independence. It doesn't help that the Administration is filling important international finance and diplomatic posts with judgment-impaired political hacks rather than individuals with suitable talent to address the risks. In short, international interest rate spreads are useful to watch here. In addition, credit spreads (corporate minus Treasury or low grade corporate minus high grade corporate) are also important. At this point, a further deterioration in credit spreads would be a very strong signal to batten the hatches.