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

To: Sun Tzu who wrote (93422)	4/10/2008 4:30:24 PM
From: Sun Tzu	Respond to of 110194

Several years ago I heard about a banana republic that in an effort to improve roads, painted 5 lanes on a 4-lane highway. With this, the ministry of transportation triumphantly declared a 25% increase in highway capacity under difficult budgetary conditions. A year of plenty accidents and several fatalities convinced the ministry to undo the change and paint back 4 lanes onto the highway. They recorded this as a 20% reduction of highway capacity and (get this!) a net gain of 5% over the two years (+25% - 20%)!! It seems that these days similarities between the US and banana republics is never ending... The weird stuff at the Fed, the weird stuff at the Treasury, and the weird Bear Stearns fiasco becomes a little more suspicious, if that was even possible, after reading, "Wall Street's Latest Illusion" in Barron's. Andrew Bary explains, "Some Wall Street titans have been able to book gains from the declining value of their own debt."...Mr Bary explains, "When a company's credit weakens and the yield on its debt rises relative to risk-free Treasuries, the debt becomes worth less to the holder. The financial company, which is the debt issuer, then takes a gain, because theoretically it could buy back its debt below face value."

To: Sun Tzu who wrote (93422)	4/10/2008 7:05:30 PM
From: Tommaso	Read Replies (1) \| Respond to of 110194

>>>Incidentally, I’ve heard some people claim that a gold standard would have prevented this type bubble. Nothing could be further from the truth. <<, There are a great many things that could be further from the truth.