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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 (56570)	3/22/2006 6:42:04 PM
From: orkrious	Read Replies (4) \| Respond to of 110194

Ork your reply to 1 and 3 are sort of contradictory. How? It's just possible the low end will outperform the high and middle end. It's indpendent of rates. But if rates continue higher all builders are going to be destroyed. I think initially (as in now) homies are following 10 yr treasuries but just as gold disconneted with the US$, homies will disconnect from treasuries. In fact, I see a distinct liklihood that mortgage rates themselves disconnect from 10 year treasuries. I assume you mean the homies continue down while bonds reverse up. As you and Heinz have pointed out so many times, it all depends on domestic demand. I really don't have a clue which way it's going to go. Will the dollar (and credit spreads) get destroyed which at least initially will require higher rates? Or will the domestic need for yield overpower it all? I don't have a clue. The one thing I do know is no matter which scenario takes hold, the homies are toast.

To: mishedlo who wrote (56570)	3/22/2006 6:42:15 PM
From: patron_anejo_por_favor	Respond to of 110194

>>I think initially (as in now) homies are following 10 yr treasuries but just as gold disconneted with the US$, homies will disconnect from treasuries. In fact, I see a distinct liklihood that mortgage rates themselves disconnect from 10 year treasuries.<< I think that's possible as long as the FCB's continue to agree to finance our deficits. In that scenario, long rates stay flat while the housing bubble deflates. If they decide to decrease (not necessarily start to sell their portfolio, mind you) long bond purchases though, rates will climb and the housing bubble will make a Hindenburg-style soft landing. Domestic investors just don't have the means or ends to take up the slack for the size deficits being run.....