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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 (31009)	4/21/2005 10:57:47 AM
From: ild	Read Replies (2) \| Respond to of 110194

Date: Thu Apr 21 2005 10:31 trotsky (Antal Fekete's refutation of Krugman) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved is highly recommended reading, since it inter alia very concisely explains the arguments in favor of a gold standard in plain language. in addition, Fekete's sharp intellect unmasks the mainstream defenders of the status quo as the mixture of economic illiterates and bribed sell-outs that they really are. Krugman's missives have recently gotten a hearing here on account of his critical stance toward the current marionette that is supposedly in charge of the government. but let's not forget that this is a case of an establishment shill perpetuating the myth that there are actually political choices available and that there are material differences between the two faces of the big brother welfare/warfare party. iow, Krugman is advocating socialism and shamelessly worships at the altar of the state to all our detriment. the economic nonsense he's pushing should be rebutted at every opportunity. Date: Thu Apr 21 2005 10:11 trotsky (@credit spreads) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved yesterday, someone asked if the recent widening of credit spreads could not be attributed to the developing crisis at GM and Ford, and that thus, by implication, it's not as remarkable as it would otherwise be. my answer to that is that it is basically irrelevant what specifically triggers a sell-off in lower grade debt. after all, GM and F are hardly the only borrowers that appear less than creditworthy and have nevertheless seen huge rallies in their paper from mid '02 to late '04/early '05 , as hedge funds mindlessly chased yield. losses triggered by one issuer's paper , especially if it's a HUGE issuer such as GM, tend to propagate throughout the low grade debt universe ( it's similar to say INTC issuing a profit warning and other semiconductor related stocks declining in sympathy ) . one mustn't forget that there's a lot of leverage employed in these markets - which tends to trigger margin calls when an unexpectedly large move in the wrong direction occurs. the baby is then thrown out with the bathwater, although the analogy is probably not entirely appropriate here ( we're looking at loads of dirty bathwater without any babies in sight ) . in any case, the conclusion that risk aversion is rising sharply is inescapable. this is actually GOOD on the one hand ( since less misallocation of capital is likely to occur ) , but it is also bad for the vastly inflated markets that have all risen on the promise of unending liquidity provisions by the merry pranksters. thus, from here on out, stock market bounces are highly suspect and very likely represent selling opportunities for a large medium to long term down move. note that the topping action itself was an absolute text-book classic of important technical divergences, mispriced risk and widespread complacency.