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

To: jimmg who wrote (76476)	12/22/2006 6:23:58 PM
From: NOW	Respond to of 110194

is your point you are not quite ready to short this market?

To: jimmg who wrote (76476)	12/22/2006 7:21:41 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

<Russ posting the low cash reserves are interesting but don't help me gauge timing and magnitude of consumer behavior> Other than at the margin, I don't see consumer behavior really changing, even if he is broke. The change is going to come in credit conditions, which are now worsening. Lenders are retreating from sub-prime already, it will spread to mid-prime. Before it's all over there will be complete contagion, where only pristine credit will be able to get loans. The cash on hand chart I gave you is useful mostly to gauge ability to service debt, which is worsening. If ability to service debt fades, so will credit conditions. That is now underway, the credit market is finishing the year on a poor note. Notice in the ABS credit insurance how the market made the umpteenth bounce after the big Nov-Dec decline. The bounce has now failed. Look at HE-BBB, but especially look at HE-A, which went to a new low today. eurobondonline.com

To: jimmg who wrote (76476)	12/22/2006 8:17:37 PM
From: bart13	Read Replies (1) \| Respond to of 110194

... the stock market keeps cranking out fresh highs. We'll eventually see a bust. No question about that. But how can you know when? Could it go to a $600, $700 or $800 billion deficit? I think yes it can. I don't know when any better than anyone else, and I do watch key Fed stats closely. Among my top five is repos and the correlation is unmistakable, albeit with varying lags. (chart not current) Both the annual and the 13 week change rate have recently dropped quite a bit too, for what its worth. I'm out of my S&P longs with a small loss.

To: jimmg who wrote (76476)	12/22/2006 8:56:54 PM
From: regli	Read Replies (2) \| Respond to of 110194

<i."... Things like Russ posting the low cash reserves are interesting but don't help me to gauge timing and magnitude of consumer behavior. With rapid borrowing and fast growing m-3, there is plenty of liquidity to fuel consumer purchases." I don't think it is about liquidity when it comes to the consumer. I believe it is about physical limits. The real question is how long consumers can continue to defy gravity in the face of record highs/lows in category after category. I am quite aware that there is the saying "don't bet against the U.S. consumer". However, given the charts below in addition to the one in my prior post, isn't it just about reckless for any investor to continue to invest as if the consumer has lots of upside left? Isn't it foolish to simply bank on a "this time is different" belief? If a chart shows an extreme, it is highly advisable to explain fundamentally why something can possibly continue to defy gravity. Simply explaining fundamentals away by hanging on desperately to a trend seems utterly irresponsible. contraryinvestor.com contraryinvestor.com web-xp2a-pws.ntrs.com

To: jimmg who wrote (76476)	12/23/2006 8:16:16 AM
From: Real Man	Respond to of 110194

"We'll eventually see a bust. No question about that. But how can you know when? Could it go to a $600, $700 or $800 billion deficit? I think yes it can." Good question. When? I agree with you. My personal belief is that we should see first 1) Yen surge 2) Yields surge in bonds and/or 3) Surge in spreads We are not seeing that now, so, I agree with you and right now I see no danger. I could be wrong, as there is something weird in the market right now regarding liquidity and the stock market move, as bart13 observed. We'll be the last ones to know what exactly it is. There is a huge time bomb under the market place, which is derivatives. We don't know what's going on there, and will be the last ones to learn of an explosion. It's my belief that IF something nasty happens along the lines Russ predicts, it will be in derivatives. I see anecdotal evidence of that, but so far nothing specific. All derivative blow-ups have been papered over by the Fed, with little to none hickup in the market. The reason for my expectation is the size of the credit derivative market. It is much bigger than the Fed, so, I think, if it decides to blow up, it will be difficult for the Fed to paper over it. Derivatives are also the mechanism that the Fed uses to control the markets. Inevitably, loss of control will amount to a breakdown in this mechanism.