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

To: UncleBigs who wrote (48107)	12/24/2005 12:41:11 PM
From: sciAticA errAticA	Read Replies (1) \| Respond to of 110194

re: I am of the belief that gold/silver/copper does very badly in a deflationary environment. ... you're plucky to not allow history to sway your thinking...

To: UncleBigs who wrote (48107)	12/24/2005 12:59:29 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

Excellent post, I agree with it in general except at one important comment, "I think long term zero coupon treasuries will be the number one performing asset class in 2006." I consider Treasuries beyond one year maturity to be a "buy everything" so called excess liquidity mania as well.

To: UncleBigs who wrote (48107)	12/24/2005 1:56:58 PM
From: kris b	Respond to of 110194

Amen to this. Happy Holidays everyone ....and prosperous deflationary New Year:) Kris

To: UncleBigs who wrote (48107)	12/24/2005 2:03:00 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 110194

US treasuries out of favor? Not with foreign CBs -- the major buyers Long yields no higher now than when the Fed began hiking. Extremely low (to put it mildly) considering the mounting global inflationary pressures. I would argue that the belief that long rates will remain low as far as the eye can see is perhaps THE key factor supporting all the extant bubbles.

To: UncleBigs who wrote (48107)	12/24/2005 2:37:09 PM
From: Ramsey Su	Read Replies (3) \| Respond to of 110194

what happens if you plug the twin deficits into your scenario? Deflation in the US will be felt globally, ranging from Chinese imports to OPEC oil. In theory, that may help our trade deficit but in reality, it could be a lose lose situation. For example, if we import $100 and export $60, we have a $40 deficit. Now if we import $80 and export $50, we have a $30 deficit. $30 is better than $40, right? Wrong, importers lose, exporters lose. As for the current accounts, would foreigners be investing in US? What would they invest in? Would a weak dollar be necessary before that happens? In a global deflation or recession environment, there may not be any money to invest anywhere anyway. With the global production capacity right now, we can easily have Asian contagion part II. If fiscal deficit remains at current level, would the world have enough savings to continue to fund the deficit? What level of interest is needed? Do we want a strong dollar or weak dollar? Do we have a choice? Finally, there is no doubt that the US is deeply entrenched in an asset based economy with little chance of switching back to an income based economy. In addition, the asset of the day is real estate, not just real estate but the home. Equity in your home, in a deflationary environment, is pretty useless when it comes to stimulating the economy. We will soon find out how many households are already relying upon this asset to support their current life styles. Deflation/recession is much harder to fix than inflation, the Feds have repeatedly stated that. They are likely to be very aggressive if the economy slows. That is not going to make cash safe. 2006 is going to be quite an interesting year.