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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (143)	6/9/2007 10:54:33 PM
From: Box-By-The-Riviera™	Respond to of 71405

you bet. get ready while you can. de nile is not a river you can live by in a box.

To: Real Man who wrote (143)	6/10/2007 4:16:55 AM
From: stan_hughes	Read Replies (2) \| Respond to of 71405

The root cause of last week's bond gyrations has been bugging my butt all weekend. Thought I'd share my detective work with you for some Sunday morning musing. Nomura thinks everything is business as usual and blames global market bulls for driving rates higher. As of Friday's action, they see UST yields as attractive here based on their expectation of a weaker Q2 and Q3 -- investinginbonds.com In that same vein they also apparently think Q1 GDP is effectively overstated by inventory builds and therefore conclude that a ramp-up in rates is not justified. Without agreeing or disagreeing IMO their analysis strikes me as conventional wisdom and doesn't seem to address the possibility of exogenous events affecting rates. So on the subject of exogenous events, I've read some tales here and there this weekend about MBS portfolios starting to get blown out in recognition of foreclosure realities. Might be some truth to it too, based on this chart -- investinginbonds.com Some anecdotal stuff too FWIW, be sure to read the replies -- Message 23611428 I also thought this Kasriel blurb was interesting in light of the all of the above, because he speaks to the mortage issue as well as noting a reduction in foreign holdings -- web-xp2a-pws.ntrs.com My recollection is that a lot of the MBS stuff get papered over using derivatives to cap the risk and then dumped offshore to the high-yield hunters. And now there are transactions occurring saying it's worth NADA, or next to NADA. A write-off, once booked, would need to appear as an outflow to balance the books even though no money actually leaves -- therefore there is no downward pressure on the USD. Perhaps I'm crazy, but it does appear to fit. So instead of Nomura's explanation that the bond swoon can be blamed on overenthusiasm for global growth, what really may have happened is that a few MBS derivative dominoes got knocked over last week. Or if you want to really give yourself a brain cramp, maybe both were, are, and perhaps will continue to be true even at the same time. Are failures in the MBS market big enough to upset the overall interest rate cart? Has the now blossoming default risk been sufficiently spread out over enough parties to make it manageable in a crisis? Show me the Master Derivatives Book and I'll answer these questions LOL Lots of undercurrents and things happening out there away from the equity markets that will ultimately shape their direction -- not a good time to be taking too many chances IMO