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

To: orkrious who wrote (32928)	5/21/2005 9:04:55 AM
From: russwinter	Respond to of 110194

I chuckle when you ask me about reading so and so, then I read the articles you reference me to, and am amazed. Thanks for being a great "eye on the ball" collaborator. Very worth while read about using backwardization and contango in commodities. Personally I think China could slow to even 3%, but it won't matter when the copper is gone. Then China will slow even more. Key Coxe comment.: "the industrial metals, there’s a ratio of roughly three times. So if GDP goes up 8%, what you get is about a 24% increase in the base metals. Back of the envelope calculation but it’s useful to use. So what you’ve got to understand then, is if China slows down, let’s say from 9 ½% last year to 6% this year and that’s below all but the most bearish forecasts, then copper consumption will be up somewhere in the order of 16 to 20%. But the growth in copper consumption that’s already occurred and the other metals has run down inventories dramatically over the last three years."

To: orkrious who wrote (32928)	5/21/2005 9:39:42 AM
From: russwinter	Respond to of 110194

Forensic evidence on Don Coxe's points about borrowing in Eurodollars (ED) to speculate: The sheer scale of their operations in the hedge world is truly amazing. I saw an item to the effect that the growth of Eurodollar deposits as measured in broad US money, is up 77% over three years. Now by definition, these aren’t deposits within the US, but they’re liabilities. And the great percentage of those would be hedge funds that are headquarted in the Carribean and so they’d be borrowing in EuroDollars to buy other things, Treasury bonds, corporate bonds, junk bonds and from time to time commodities and commodity stocks. So as they unwind their positions, they can swamp what’s going on in the garden variety world that I work in. And so this whole question as to whether A) the US economy is slowing down, first question, B) whether the global economy is slowing down pending recession…all of this produces huge swings in Hedgeland. And I’m very impressed with how well they’ve been able to unwind their positions and I don’t know whether they’ve completed their sales of the commodity stocks as against their bond bet, but I think we’re bound to be some way along. The answer to Coxe's question about fund liquidations? On March 8th, the specs (both small and large) were short (borrowing) 1,148,084 ED. They weren't making bet on Treasuries, if anything they were shorting (borrowing) there as well. The combined 5 and 10 year short position has dropped from 788,414 to 439,358. As of last Tuesday it's 470,208, that's down 60%. By the way 259,483 (or 38%) of this overall 677,876 drop, occured in just the last reporting week. Of course Wednesday almost appears to be the climax in the rate complex, and there was even more on Wednesday through Friday in the USD and commodity trades. Judging from the change in positions in various commodities and currency plays (that I mention in the WSE piece), wallstreetexaminer.com it's clear to see, that's where the unwinding came first and most furiously, especially of late. I would say the funds greatest exposure is still short the rate complex, but perhaps now it's more manageable?