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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 (69896)	9/18/2006 10:54:05 AM
From: bond_bubble	Respond to of 110194

To assume everyone hedges 1 year out is a bad assumption. Are builders hedging lumber prices? For a year or for 3 months? Very few airlines hedged fuel prices. My understanding is that only one did. (I forget which one). As of now, anyone that hedged oil prices at $80 is in trouble (competitivewise) if oil prices fall to 60-65 and stay there. Actually, everyone doesnt have to hedge (most importantly the later stage companies like distributors). But I'm not sure what percentage of companies have hedged (it could be small). I read that farm crops consume anywhere 25-50% fuel (fertilizer, hauling etc). I'm not sure how fuel prices have not caused food prices to rise. But my guess is, as more money is fed to produce ethanol, more land would be alloted to corn and less to other food crops, and also an increase in acraege to cultivate corn. All this could cause price increase in food items (and total fuel consumption in farming increases). Just read Russia is stopping 20B LNG (significant fuel source for fetilizers) project because of cost overruns (and I guess less price fetched by n.gas): chron.com Overall, I think there is much more inflation that will come before the credit bust. I dont think housing inventory rise of 30% is anywhere near high enough to cause substantial price fall. One of my friend bought a townhouse in N.H in 2003 and his house has appreciated 30%. He says, worst case houses will fall only 30% and so he is not in a hurry to sell!! Bottomline, housing is not going to be a major drag for atleast next 6 months I think and hence inflation is going to soar higher. Fearing this inflation, Fed will raise interest rates and that will be the trigger for credit bust. This is my opinion.