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

To: SouthFloridaGuy who wrote (73051)	10/27/2006 2:19:08 PM
From: J_Locke	Read Replies (5) \| Respond to of 110194

A soft landing for the broad economy from a deflating housing bubble is virtually guaranteed. Because mortgage debt outstanding is driven by new entrants into the market and move up buyers, total mortgage debt outstanding continues to increase even as housing prices decline. Indeed, it's almost a mathematical impossibility for outstanding mortgage debt to decline. This is well documented by Doug Noland's Credit Bubble Bulletin, which reports mortgage debt up by a whopping 16.4% ytd, even as housing prices are down 2%. As we all know, the economy is driven by credit growth, so housing continues to contribute to growth even as prices are declining. The elephant in the room remains the current account deficit and lack of domestic savings (the two go hand in hand.) Many believe that the fed can ride to the rescue by cutting rates, but what are rate cuts except a way to pull forward demand by driving down the saving rate? With a saving rate already in negative territory, this becomes problematic at best, not to mention terribly irresponsible. The yield curve is now inverted in all the Anglo-Saxon countries (US, UK, Aus., NZ, and CA.); all have had soft landings despite the deflating of their respective real estate bubbles (for the reasons above.) But the problems are just beginning.

To: SouthFloridaGuy who wrote (73051)	10/27/2006 4:13:02 PM
From: Broken_Clock	Read Replies (1) \| Respond to of 110194

"We are not in a depression, recession or anything. The stock market is not a bubble and housing is deflating. Fine, this isn't 1999, but everybody then was complaining it was a bubble. I remember walking across the street and getting a 100% pay raise back then. No, this is far normal. Who would've have thunk (besides me) that a housing contraction of this magnitude would lead to a low unemployment rate, companies spending and inflation expectations that are contained. Once housing stabilizes, then the economy moves to the next higher level. The exact definition of a soft-landing." You forgot to add that we have also successfully brought democracy to the Greater Middle East where the ignorant Muslims now bask in the effervescent glory of the mightiest nation ever to grace the face of this beautiful planet.. I think I'll have a beer, watch the World series and enjoy another MISSION ACCOMPLISHED! Life is good!

To: SouthFloridaGuy who wrote (73051)	10/27/2006 11:02:30 PM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

My main point was certain parts of the economy do well and others stink up the joint but long term cash is trash. Now it is housing's turn to stink up the joint and most whose living was tied to that lately might feel like they are in depression just like many in technology five years ago. Yes bond prices are the big risk and a quick move of several hundred basis points higher in rates and all bets are off for the economy. Most of what you and J Locke say I agree with. Basically you've got a huge class of people who have built up a tremendous amount of equity from property and will fuel spending for a long time to come over and above what the norm was 5-10 years ago. Then you have the leveraged up to their eyeballs who never had any equity anyway when the housing run began several years ago so they'll remain in debt slavery with their credit/crack fix continuing for years to come just trying to continue getting by but cat the same time spend near what has been their norm on basic necessities and the occasional splurge, which the past few years was out of control.