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

To: mishedlo who wrote (74808)	12/5/2006 5:02:36 AM
From: Mike Johnston	Read Replies (1) \| Respond to of 110194

You perform fine analysis. However you have fallen into a trap. Your analysis can only be applied under following conditions: 1. Free market economy with limited government intervention 2. A sound currency 3. Accurate economic data My short answer is that we can no longer apply conventional economic analysis, because we no longer have the three conditions mentioned above present in our economy. Some rhetorical questions: 1. Why do we have a huge yield curve inversion with rampant inflationary pressures and stock indexes at record highs ? Why has the ages old relationship between yield curve inversion and recession broke down ? Why now? 2. Why are dollar reserves at FCB's growing at 15% a year and yet supposedly dollar money supply growth is only at 5% ? 3. Why M4 growth in UK is 14% and yet the dollar is collapsing against the pound ? 4. This question you have asked yourself: "I am the only one that finds it odd that the Fed is no longer concerned about the systemic risk at Fannie Mae or the derivative mess they are in even though Fannie Mae has not filed a quarterly report since 2004? Did systemic risk vanish overnight? " 5. Why is bond market ignoring collapsing dollar, busted budget, soaring stock market and soaring commodities ? 6. If a house has risen in price from 100K to 500K and then corrects to $400K, is it such a big deal ? Is it deflation ? 7. Is 11 fold increase in Zimbabwe stock market this year a bubble ?

To: mishedlo who wrote (74808)	12/5/2006 5:12:55 AM
From: Mike Johnston	Read Replies (5) \| Respond to of 110194

You don't have to answer any of my questions, i already know what is going on. As a matter of fact, this is the only way that current relationships between the economy and different markets can be explained (they cannot be explained by conventional economic analysis ) 1. Money supply growth in the US is running anywhere between 10-20% a year. Consumer inflation is running at 8-10%, poised to accelerate. 2. The Fed has already gone unconventional, having started bond market monetization in order to support housing. Money supply growth should hit 20-25% next year because of that. 3. No economic statistic and no number can be trusted anymore. 4. The Fed has/is injecting cash into Fannie Mae. That is why risk has vanished overnight, stock is rising and no reports are being filed. 5. Stock market is rising because the measuring unit, in which stocks are denominated, the dollar, is losing value quickly. 6. All around, there is a flight from money that is slowly gathering steam, with people frantically searching for a vehicle that will increase in price the fastest. Bottom line is that money is being printed at a rapid clip. With money growth at 10-20% combined with 4% interest rates, hyperinflation is a guaranteed outcome.