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

To: NOW who wrote (73066)	10/27/2006 2:43:22 PM
From: ild	Read Replies (1) \| Respond to of 110194

<<<a "soft" landing is guaranteed?>>> Of course it is. You didn't get a "Greenspan put" in the mail? It was mailed to you directly from the Fed Reserve and had your name on it. -g- Soft landing

To: NOW who wrote (73066)	10/27/2006 10:50:17 PM
From: J_Locke	Read Replies (3) \| Respond to of 110194

<<a "soft" landing is guaranteed?>> I would in this case actually prefer the term "slow landing". The real problems in the economy will come from mortgage defaults, which won't hit their peak until 3-5 years after the bubble peak (which was perhaps circa September '05.) Defaults today remain low by historical standards. The UK, Aus. and NZ were supposed to be the canaries in the coal mine. Their consumer debt to income levels are even higher than ours (look it up, it's true.) Their housing bubbles just as immense. Yet nothing but soft landings in all three countries. Why? Roubini tried to answer this question, but I find his answer unsatisfying if not lame. rgemonitor.com On the issue of New Zealand's savings rate, his facts are flat wrong. The household savings rate there is steeply negative: rbnz.govt.nz My answer to the Why a Soft Landing question is that it's inherent in the mathematics of mortgage credit growth: i.e. the seeming paradox that mortgage credit increases even as prices fall because only a small percentage of homeowners have a cost basis that's near the top of the bubble (and first time homebuyers have a cost basis of zero). I still think it's a Boiled Frog economy that deteriorates bit by bit instead of a dramatic falloff. Note also that since we no longer have a manufacturing base, the manufacturing layoff cycle that made the '73-'74 and '82 recessions so bad is less in play. Recessions are more likely to look like a shallow 'L' than a steep 'V'. One final, unrelated point. Mother Oil is like Mother Nature: you can't fool her. If (as seems likely) US and Euro governments made a concerted effort to slam Oil and Gold this fall (partly for political reasons and partly because central banks are trying to manage "inflation expectations"), it's likely to rebound in a disastrous way. Gold prices can be manipulated for the long term because industrial use is low, so an artificially low price won't lead to shortage. Oil, on the other hand, is a different animal. If you keep the price artificially low you will get a shortage, and I think that's what we're set up for this winter or next spring. Witness the Pavlovian rebound in SUV sales when gas prices dropped. This is a disaster in the making.