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

To: westpacific who wrote (76611)	12/26/2006 9:40:20 AM
From: russwinter	Respond to of 110194

<54T in wealth, 50T in debt.> Total overstated household net wealth is 54t, debt was 13t. But the bottom 80 checks in at about 7t wealth (almost all housing) and 6.5t in debt. But we know that within that group are plenty of 1:10s, not 1 to 1's.

To: westpacific who wrote (76611)	12/26/2006 10:08:24 AM
From: $Mogul	Respond to of 110194

Inflation and economic growth are down to 3.00% indicating a Fed Funds of 5.25% is quite tight. Leading economic and inflation indicators have slowed. In 1979, the Fed stopped increasing for five months but the economy continued to slow and inflation took another leg up, so that would be a worst case situation. The Target Index averages 85 basis points above Fed Funds but that varies widely. The target index rate has been above the 10-year yield for only the second time since the 1970s. The last time this occurred was before the last recession. Historically, the problem isn't so much as the Fed over shoots, but that the inflation and economic growth rates pull back below where the Fed has increased to. When this happens, the Fed normally has a tough time getting back under the combined rate of inflation and economic growth. On average, the FOMC raises the Fed Funds rate two and one-half years. The length of time varies according to the sharpness of the increases and economic strength but we would assume that the economy and inflation would begin to show some of the desired slowing after two and one-half years. Since the Fed began increasing rates July 2004, economic and inflation slowing would normally be expected around the end of 2006. Using the target index, we can see how far behind or ahead the Fed is. We also have to remember that financial markets often anticipate changes, six months or more in advance.