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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 (63400)	6/12/2006 6:07:03 AM
From: shades	Respond to of 110194

I remember reading in the hungry 40's - the 1840's the USA was the emerging market and all those british investors lost thier butts while US states defaulted on the debt. The Fed is in control of almost nothing. Chromatic has been saying that awhile for many of the same reasons - the debt is outside the borders now, derivatives have magnified it, and the fed doesn't hold the fiscal reigns on runaway budgets. Now if things get too chaotic Mish do you feel perhaps the next group of "engineers" will try to sell the public on the idea that yes we need to link the fed and fiscal control into one body? So much for the founding fathers dream of seperation of limited powers. Chromatic said perhaps this will happen - and a hitler type will come to power. I think it is silly that the words of one man - just the WORDS can impact our markets - that is an inherently unstable situation. Philster harps day after day what a beautiful thing they have created in the wall street casino - have so many sheep lined up to take the falling knives for them in the markets as they go down. My friend that is a budget analyst with the air force called me over the weekend telling me he lost his butt in emerging markets last month - what did he expect when they started draining liquidity? He said now is a good time to buy more since it is a little lower now!!?! I had some emerging markets and lost about 7% from the peak but I bailed after enough pain - I feel I waited a week longer than I should have. Bogle was not happy, I market timed. news.goldseek.com The end of the yen carry trade is going to be very painful for Americans. Most of the money from the carry trade went into Treasuries and Agencies, that were leveraged, then invested in this order: third world stocks and bond markets, other stock and bond markets and to a small extent in commodities. As you have seen over the past two months foreign stocks and bonds are off 28% and 10% respectively. That is one reason why. The pressure will really start to build on US markets, particularly debt markets. An illegitimate source of funding will have ended. The problem left for foreigners is what do they do with the physical dollars they are holding? They don’t want to be in US debt or stocks so the only alternative is commodities, gold and silver. (I think gold is not NEEDED - but oil is - I shifted some emerging market stuff into more energy and the dividend achievers and some utilities) kiplinger.com When you declared your buyer's strike a while back, you said foreign bond purchasers were pushing long-term yields lower than they would be otherwise. Do you see that continuing? At this point, somebody outside the U.S. owns 49% of all outstanding Treasuries, twenty-something percent of all corporates. If they continue to accumulate in the way they have been accumulating, by 2011 they will own every Treasury. They also are going to own about 40% of corporates. That's a mathematical equation; obviously it's probably going to come out differently. But even if things stay where they are, you've got a different set of players that own half of it. Anybody who owns half of anything starts to control its price, I don't care what it is. Now you have a different set of dynamics in play. The Chinese are among the latest buyers of Treasury bonds. They're doing it because their banking system is not very good; it's immature. They say, "Well, if we bring dollars in - whether it's Treasuries or dollars bills, it doesn't make any difference -- it will add strength to our banking system. And people will want to do business with us. That's an economic reason, not total return reason.

To: mishedlo who wrote (63400)	6/12/2006 8:29:24 AM
From: UncleBigs	Read Replies (1) \| Respond to of 110194

that's hilarious Mish. I think the Fed is in control of quite a bit. They induced the housing/consumption bubble, the speculation in stocks and commodities by lowering rates to 1% and keeping them there. The last 1/4 point hike is meaningless other than the psychological impact on the market. The Fed can also expand and contract their balance sheet to control the money supply. Like it or not, the Fed has a big impact. Are they in complete control? Of course not.