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

To: ild who wrote (64291)	6/21/2006 2:39:53 PM
From: UncleBigs	Read Replies (2) \| Respond to of 110194

why is Heinz a superstar? This quote shows why: it takes ever MORE credit to create less and less GDP growth. this is consistent with the data from the past 5 years, that show total US credit market debt expanding by roughly $12 trillion while output rose by $2 trillion ( iow, for every dollar in purported - and overstated - GDP growth, 6 dollars in additional debt were required ) . this is inherently deflationary - i.e. a situation in which the debtberg becomes so large relative to the underlying economy that the most likely outcome is a credit contraction via defaults and paralyzed financial intermediation. the gravest danger is probably posed by the banking system's exposure to mortgage credit, which comprises a historical record of 63% of all bank assets. there is only one way an inflationary resolution could come about - the proverbial helicopters becoming literal ones. this is to say, the Fed would need to change its modus operandi, and begin to buy up assets ( such as houses, stocks ) and perhaps even defaulted loans. this is of course possible, but it is not likely, since by deliberately destroying the currency at a faster than normal speed, the Fed would rob itself of its power. also, by the time the bureaucrats decide to actually implement such a new m.o., the nadir of the contraction has probably already passed. this is exactly why I think a deflationary shitstorm is coming. The Fed won't get out ahead of the deflation, they will respond to it. By the time their counter-measures begin to take effect (if they do), the deflationary credit contraction will already be well under way.

To: ild who wrote (64291)	6/21/2006 2:54:02 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Wed Jun 21 2006 14:37 trotsky (@pm sentiment) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved a few interesting recent developments: 1. the Rydex pm fund CF ratio remains BELOW its 2005 low, i.e. skepticism continues to be quite high. 2. the XAU put/call OI ratio has recently jumped to 1.34 ( 134 puts for every 100 calls ) with the expiration of the June series. concurrently, aggregate put/call OI on individual gold stocks has fallen sharply. this combination ( high index p/c ratio with low component stock p/c ratios ) is per experience a short to medium term bullish indicator. iow, this rebound could have some legs, especially as there is lots of room for funds to flow back into Rydex and other gold related funds ( i use Rydex as a microcosm of such fund flows in general, as these flows correlate very well ) .