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

To: Wyätt Gwyön who wrote (62134)	5/28/2006 6:17:35 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

Have a couple theories on how this plays out. My favored one, is that the risk premium for holding USD widens, and that means higher rates to keep marginal foreign capital in USD. Also the risk premium for holding certain kinds of debt like ABS, MBS and corporates really spikes (wider credit spreads) even more than Treasuries. Secondly the trillion buck twin deficit will collapse along with vendor financing, and tapped out consumers. In otherwords mindless consumption, speculation and military adventures don't get successfully financed, and that eases US capital demands. The USD may get tested during this process but end up holding because of repricing of rates and easing demands for foreign finance. My strategy in this scenario is to stick with and keep rolling over the most senior liquid securities, US T-bills, and watch speculative COT positions in currencies like a hawk, and be willing to hedge USD with other currencies opportunistically. Right now the USD looks OK, I was long SF and Yen for about two-thirds (continue to have problems catching the last third of trading moves, umh?)of the recent rally. futuresemail.com Emerging debt (in general) is likely to be marked down as credit spreads widen. That may be the problem rather than currency fluctuations.