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

To: Mike Johnston who wrote (70003)	9/20/2006 10:34:59 AM
From: John McCarthy	Respond to of 110194

To Mike and Bart I am at work and under the gun .... however, I am sneaking this in because both of your posts deserve a response without a long delay First - thanks for the excellence of both of your responses. Second - no need here to convince about inflation ... i.e. McDonalds cup of coffee, price of Barrons, cost of doctors visit, bar of candy, and so on and its all REAL costs .... Third - interest rates are negative - YES Fourth - didn't KNOW this 2. The fed can manipulate long term rates directly or indirectly in many ways. For example, FCB buying of bonds is a de facto monetization since they use freshly printed currency to do that and technically they never have to sell those bonds. Last - Mike this is what I was after because I did not know the magnitude. This would scare the be-jeebers out of GOD. Housing would need to deflate 50-70%. In summary - I don't fully understand all the components i.e. how the piece parts would all fit together ... but the underlying structure you defined .... feels right bart - the graph you posted is TERRIFIC. and yes - there appears to be 3 different segments to it with 1953 forward more or less what I suspected but prior years MUCH different than I would have thought i.e. inflation and long term NOT in lock step thanks to both of you - I got go regards, John

To: Mike Johnston who wrote (70003)	9/20/2006 10:39:59 AM
From: John Vosilla	Respond to of 110194

'Could something on an equally unthinkable scale happen in the next few years ? If yes, what ? Could bond yields go down to 2% ? Could the Dow go to 25,000 ? Anything is possible. Keep in mind that 2x insanity still= insanity' Who knows. To see what happened with tech and now to see land prices jump 10 fold in four years makes me think we are in different times of huge imbalances and speculation. It is undisputed that home prices are now down 10% or more in many markets. Down here in FL I see perhaps a 30%+ plunge already in land prices from a year ago if you are serious about selling. The fed along with continuation of toxic loan programs, 1% option ARM start pay rates ect.. can lend some support to overvalued real estate along the coasts. However it can do little to take care the the oversupply of vacant homes and high end condos with no end users. That takes years of normal absorption, cramdowns in value and the creation of end users to work through .. I see much talk on CNBC lately about the fed intending to burst the housing bubble to bust inflationary pressures. My guess is even a 20-30% drop in select overvalued markets won't change their thinking. As long as the overall economy, unemployment rate and stock market stay at reasonable levels they will probably ignore it and assume they are giving the proper medication to the patient..