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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (33978)	7/21/2005 4:45:46 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Where does the money come from to buy the junk, the corporates, the equities--money that is then available to buy treasuries? And if there is an effort to exchange all these other assets for treasuries, the result will be a collapse of equity prices and also a big decline in the prices of less secure bonds. A bond in actual danger of default can sell for pennies on the dollar, and bonds even of profit-making companies can be cut from par to half their value, when their interest rates go from 8% to 16%. Pension plans, IRAs, individual investors, states, mutual funds, etc all have money and more money coming in. You act as if everyone is going to pull all their money out of everywhere and just sit in cash. Not going to happen. You obviously do not understand or believe in flight to safety. I believe there will be a serious shift into treasuries. You think pension plans are going to go to all cash? I don't. As for china or Japan buying less treasuries, they already have for months now. It has not mattered. So we see a knee-jerk reaction today. Big deal. I hope it continues. I hope bond bears short the crap out of this because if it continues I will be a buyer. Watch Gross sell agencies or junk and buy more treasuries if treasuries get blasted enough. It's nice to sit back and not have a stake in this glad to be on the sidelines. A good treasury buying opportunity is coming up. As for interest rates at 16%? - You are in total fantasyland my friend. BTW they would be down far more than 50%. Would it be more like 95% or something? Perhaps you mean junk. If so no way will a fund manager like Gross will hold thru that, money will start shifting to treasuries. Mish

To: Tommaso who wrote (33978)	7/21/2005 9:37:58 PM
From: Jim Fleming	Read Replies (1) \| Respond to of 116555

Tommaso re source of funds "And if there is an effort to exchange all these other assets for treasuries, the result will be a collapse of equity prices and also a big decline in the prices of less secure bonds. A bond in actual danger of default can sell for pennies on the dollar, and bonds even of profit-making companies can be cut from par to half their value, when their interest rates go from 8% to 16%." This is the script for what will happen in the next couple of years IMO. It is not fun when you can't get a bid for a AAA bond and I've been there. Jim