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

To: SouthFloridaGuy who wrote (77745)	4/15/2008 9:50:32 PM
From: Real Man	Respond to of 116555

When treasury holders decide en masse that holding risk-free securities that have -9% real yield is a poor investment choice, especially for foreign holders, cause compounding gets you to the poor house very quickly. <G> Then J6P will increasingly decide to walk away rather than refi at 25%, and housing prices will have to become more affordable at a new 25% mortgage rate. Then stock holders will see that p/e of 50 for the dow is unreasonably high compared to the yield of risk-free securities of 20%, and decide to reduce their stock portfolios accordingly. -g-

To: SouthFloridaGuy who wrote (77745)	4/15/2008 11:37:02 PM
From: koan	Read Replies (2) \| Respond to of 116555

Longislandguy: " "If debtors can't pay debts at a 3.5% risk-free, why and how could the market send it to 12%? The only way the machine restarts itself again is with lower rates and/or lower risk premiums. The implication is that rates are too high right now relative to debts." koan: not sure what you are getting at? My simple equation: Interest rates have to be above inflation so the lender can get a return and not lose money. If inflation is 10%, interest rates need to be 12% or 13% to make up for the lost value of the debased currency. In a pure capitalist world-lol.