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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 (44861)	11/6/2005 11:39:10 AM
From: russwinter	Respond to of 110194

Refi activity is only as low as April 2005 - it is not like it is 1-2 year low> There has been a couple trillion in new consumer debt added since 2003. The heroin addict needs much more drug, just to even service that, and once again variable rates that crazies and Humpties use are much higher. Message 21859412 So not the same scenario at all, and I think Mish is closer to being right (about a consumption crash, not deflation)at this point. Refi activity will not have to fall that much to have an effect. Plus it's within earshot (1863 and now falling fast) of the lows (1500) already, idorfman.com The second component is equity extraction, or the number of people refiing and taking more than 5% over their last loan. 3q ran amazingly high on that, Message 21846196 but there is a lag, as early in the quarter, the assumption (but not the reality)was that housing prices were still heading higher. That's changed, so my SWAG is that sub 1750, combined with lower housing prices and more importantly fewer transactions, (more and more unsuccessful sellers sitting on an overpriced listings is bearish Message 21857793 now will have a major impact on consumption. However, if prices are slashed and resale activity picked back up, that would give consumption a little more support, as those transactions are still windfalls and would add to money supply. However, then you have to consider all the people with toxic mortgages and negative equity into the equation, and that's credit revulsion. I do totally agree with this statement however, and even with a ncessary slowdown in consumption will be hard to stop because of shortages and maladjustments : Remember in mid-2005, you blogged that King copper is being dethroned etc. It seemed that way then. But now, all metals seem to be peaking. Even steel has started to rise in price in recent months!! The thing is - you prediction is purely based on the output price. You are not considering the creditbubble into the equation which is the input component.