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

To: Tommaso who wrote (71312)	10/7/2006 11:21:44 AM
From: UncleBigs	Read Replies (1) \| Respond to of 110194

When the demand for instant liquidity subsides, the dollar will resume its decline. The demand for liquid cash today is extremely low. There is a pervasive mentality that everyone must own something. Own stocks, oil, gold, foreign equities, real estate. Nobody wants safety right now. The crowd wants to gamble for outsized returns in excess of cash. In my view, there will be a flight to safety that will crush asset values as the herd changes course. The key question is when will this happen and how far will asset values continue to run higher before it does.

To: Tommaso who wrote (71312)	10/7/2006 1:25:38 PM
From: mishedlo	Respond to of 110194

But this is a liquidity preference, not because I see the dollar as a store of value. Liquidity preferences are indeed the heart of the issue in any fiat regime. Time preference is the Austrian concept. A shift away from risk as you have done is part of the mentality. A shift away from consumption to savings will also take place in general especially as people start fearing they will lose their house and fearing over job losses etc etc. People will spend less. A negative savings rate is not sustainable unless home prices continue to rise. Home prices are now clearly falling, big time in some markets. You can also see a shift from risk in the outperformance of the DOW and S&P vs the Russell. Whether or not everyone perceives treasuries as a "store of value" or not is basically irrelevant. It is the shift away from risk and away from consumption (for whatever reason) that is important. A shift towards less risk and less consumption by the masses is indeed a deflationary phenomenon. Mish