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

To: GST who wrote (49481)	1/11/2006 7:18:43 PM
From: mishedlo	Read Replies (6) \| Respond to of 110194

You fail to explain our position and continually point to a straw man that does not exist. I am asking you to stop saying what our position is since you clearly you do not know even after 200 attempts. You stating the views of deflationists would be quite similar to me stating "Inflationists believe the moon is made of green cheese". You put up straw men that simply do not exist. I can not speak for all of us but let me state what I think are the generally widely held ideas. 1) There is an enormous bubble in credit lending. 2) That credit lending fueled bubble prices in houses and other assets such as the stock market 3) At some point housing prices will fall as the pool of stupid buyers exhausts itself. The housing sector will stall 4) A stalled housing sector will cause rising unemployment and lower demand for goods and services, appliances, eating out etc etc etc 5) bankruptcies will rise 6) banks will NOT be willing to extend further credit on assets declining in value, especially to those out of work, or nearly underwater on their appraisal. In fact appraisal get tighter at long last. 7) credit lending plunges. We have already seen the second consecutive month of declining consumer credit. First time since 1992. There is every reason to believe a reversal is underway. If not now then soon. 8) Bankruptcies and falling asset prices and people walking away from mortgage loans is a destruction of credit 9) If credit counted as inflation on the way up, a destruction in credit MUST be counted as deflationary on the way down 10) That destruction in credit, bankruptcies, unwillingness of banks to lend, and a rising propensity for people to save will be greater than any monetary printing by the FED to stop it. That is what happened in Japan and that is what we feel will happen here. That is the deflationary case and I feel it is 100% rock solid. The malinvestments (housing and stock market) is going to be brutally punished and credit is going to get pounded, the desire to hold cash and to save will rise. All the very essence of deflation. I reserve the right to correct this but I doubt it needs much correction. If UncleBiggs or anyone else wants to add or subtract from this I am also willing to modify accordingly. I would like to speak for as many deflationists as I can, not just myself. Mish