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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (72583)	12/19/2007 11:52:54 PM
From: Sr K	Respond to of 116555

To what extent do you think the counterparties of derivative transactions are a material part of the picture? With $70 trillion of mortgage-related derivatives, there are going to be and there have been winners offsetting the losers. And many participants have their own hedges to some degree. Isn't the net problem smaller than the market thinks? Ballpark, I think it is 15% to 18% of $2.5 trillion or $450 billion or less. Spread over 2-3 years, that is less than we spent in Iraq. I am not minimizing the waste there, but our economy withstood the shock of that waste. And because of the counterparties, some of the gains will cycle through the economy as an offset.

To: mishedlo who wrote (72583)	12/20/2007 12:03:44 AM
From: Steve Lokness	Read Replies (2) \| Respond to of 116555

Mish; I have repeatedly said that housing was way understated on the way up and in now understated on the way down. Yes, you have said just exactly that. I sure wasn't taking issue with your early predictions on housing. You were spot on. But is it deflationary times if everything associated with owning a home are going up? Heating, real estate taxes, insurance, maintenance - even lending cost if your mortgage resets are up. That's inflation to me personally because I live in the same home I have lived in for 30 years. My cost are all up and have never climbed this fast. The real estate taxes are just catching up to the wild inflationary past several years. Those are not going to go down as they reset to yesterdays prices. If you take the argument that inflation/deflation is a result of money supply (and debt) in the economy, then you have to think of housing in those terms don't you? Is the downturn in housing a result of shrinking money supply in the economy or is it a result of overbuilding and over supply? I think it is the later. And I think that is why housing is down while all the rest of the things we need daily are up. Are the two issues related (oversupply of housing and reckless money supply by Greenspan/Bernanke), yes I'm sure they are - but until I see some decrease in the things I use daily, my world is in inflation. Before you jump all over the comment above that housing problems are a result of shrinking money supply, I will readily acknowledge that yes there is a lack of money - but not in the economy but rather in the specific building home lending industry. It's a specific problem based on specific industry (housing). If it was the economy as a whole that was witnessing a shrinking money supply, then wouldn't we see less inflation in the areas that are going up so darn fast - energy and food especially? Respectful of your opinions as always; steve

To: mishedlo who wrote (72583)	12/20/2007 8:10:34 AM
From: valueminded	Respond to of 116555

Mish: My arguements against deflation: Dollar will buy less in the future. paper monies eventually trend to zero against commodities failures of democracies are fiscal. (once people realize they can vote themselves money, they do so with disdain) federal govnt will not pay back its debt in "equivalent worth" dollars since dollar expansion was understated on the way up, the contraction wont be counted as a contraction since they assume a monetary base smaller then existing. (housing is one example) Amazingly enough, the writedowns in the banks etc are being treated as a Ho-Hum. I guess for a 10 (?) trillion dollar economy, even a 500 billion dollar write down is only 5%. The issue for me is timing. I can never get it right. Just my thoughts. Chris