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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (70849)	5/9/2005 9:45:54 PM
From: Real Man	Respond to of 94695

financialsense.com I agree, the Fed model shows that stocks are undervalued relative to bonds. Real p/e is above 20. Financial stocks playing with 500 Trillion notional value (30-40 Trillion market value, roughly half of that, 250 Trillion NV OTC, unregulated) interest rate derivatives are about 30% of the SP index, and account for most of SP earnings. They can manufacture earnings the way they please, keeping derivatives profits on the books, derivative losses off the books. GM and F are examples. With their debt downgraded to junk, I'm not sure one should be bullish on SP. Fannie and Freddie, whose troubles with derivatives are well known, are the main engine of the huge credit bubble. With total US debt at all-time highs (surpassing previous highs during the Great Depression) of more than 300% of GDP, any credit problems will escalate into derivative nightmare. I think we'll start to see some of these this year, due to record number of ARMS taken by marginal borrowers in recent years.