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

To: orkrious who wrote (74794)	12/4/2006 4:24:16 PM
From: mishedlo	Respond to of 110194

That's the best piece Hussman has written in a long time. Everyone thinks that when the foreigners reduce their appetite for treasuries it will send rates higher. Hussman says that so far the evidence indicates that demand from local investors expecting an economic slowdown is overwhelming the reduction in foreign demand (as Mish and Heinz have been predicting it would) and driving rates lower. It was a good piece but his harp about wage inflation does not ring true. That said, despite stubborn core and wage inflation numbers, the headline CPI and PPI inflation numbers have been surprisingly good over the past two months. The myth of wage inflation has been shattered It's all an illusion hussmanfunds.com He was also wrong a few months back when intermediate PPI was suggesting one thing and Final PPI another. He believed the wrong one expecting inflation to break out. In the short term I expect he may be correct in that the yield curve drops more on the front end. But... That will put more pressure on the Fed to cut. I think he seriously underestimates what is going to happen on the jobs front. And he is correct that wage data may actually spike up (finally) at least on a UNIT basis as production slows. But is that any reason to hike? Seems silly to me. In many aspects I can nitpick that column to pieces, but he does present a position and anyone who does present a position runs the risk of having it nitpicked to death. To me the case to hike rests not on wage data and not on CPI (probably overstated now - in the short term) but on complete lunacy in the credit markets. That is REAL inflation if you ask me even as prices on many goods and services are now actually falling. FWIW my target for next year on the long bond is 4%. I will address all of this and a whole lot more in a blog tonight that I finished writing on Saturday. W&G is running it today and I will post it tonight. I think it is a good one but I am obviously biased. Mish