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

To: mishedlo who wrote (53599)	2/12/2006 3:18:22 PM
From: russwinter	Respond to of 110194

Could T-Bills become unsolvent? > Ultimately they could, but pass that bridge when we come to it. Of course they could be destroyed by hyperinflation as well, but I just don't see that much excess money printing going on right now, mostly a figment of the imagination of Humpties and Riskloves. However, a credit downgrade is all too real. Credit is still being created at a large clip, but that could end abruptly in a fragile system. This transition occurs over the course of an expansion as increasingly risky positions are validated by the booming economy that renders the built in margins of error superfluous - encouraging adoption of riskier positions. Eventually, either financing costs rise or income comes in below expectations, leading to defaults on payment commitments. --Minsky Clearly today, financing costs are rising, although the risk premiums are so tiny that it is offsetting this. All short term borrowing costs have upticked steadily, yet the noninvestment grade spreads have shrunk, which is unbelievable. However any credit spread move at the margin or normalization will have far reaching ramifications. We post here constantly on defaults and delinquencies, and I feel they are both building and being completely ignored. There will be a snapping or realization point.