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

To: John Vosilla who wrote (88018)	10/27/2007 12:09:36 PM
From: Mike Johnston	Read Replies (1) \| Respond to of 110194

"You can't have raging inflation and declining home prices in a balanced market at the same time" I think house prices are pretty much close to the bottom in nominal terms. But in real terms they will plunge at least another 50% or more, so will the stock market ( in real terms ). Many homeowners will be bailed out by the government through Fannie M, CFC or state governments but in a few years they will not be able to afford taxes or to heat or repair the house. It will take only 3.6 years of 20% inflation for real house prices to decline 50% even though their nominal prices stay the same. In my scenario gold will exceed the price of the SP500 somewhere around 1800 area in 08/09 ( read : 50% plunge in real stock prices is coming )

To: John Vosilla who wrote (88018)	10/27/2007 4:02:15 PM
From: GST	Read Replies (1) \| Respond to of 110194

<You can't have raging inflation and declining home prices in a balanced market at the same time..> On the contrary, you can't have a strong currency while running a massive current account and government deficit while going into recession. A relatively strong currency has been our most deflationary features -- and it is a thing of the past. As housing drops and the economy slows, down goes the dollar and up go prices for everything traded on international markets. A plunge in housing will push the dollar into the abyss. The dollar is the ultimate bubble. The dollar is the key to inflation.