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

To: bond_bubble who wrote (44816)	11/5/2005 4:16:07 PM
From: UncleBigs	Read Replies (2) \| Respond to of 110194

Higher interest rates will kill the housing bubble and therefore the economy will fall with it. It's that simple. We have a housing centric economy. It depends on increasing amounts of remodeling, new home construction, condo conversions, commercial construction, etc. The leveraged speculating community can and is borrowing huge amounts of euro and yen and buying US dollar denominated bonds while hedging currency risks via futures/options. Curiously this is happening as the Foreign Central Banks appear to have lost their appetite for US Treasuries and Agencies. Doug is somehow arguing that the leveraged financial sphere will keep the economic sphere levitated and we therefore will avoid recession even if the housing bubble implodes. I disagree. I believe the key to the U.S. economy is continued home price appreciate, brisk new/existing home sales, cash-out refis and mortgage lending growth. If these areas falter, the U.S. economy will fall. Doug appears to believe that the key to the U.S. economy is leveraged speculating community and the carrytrade. Carrytrade profits do not leak into the economy very easily. This money doesn't get into the hands of consumers and spent at retail. This is just my opinion. Noone knows for sure what will happen next. Doug has his theories and I have mine. Opinions are like assholes. Everyone has one.