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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (124580)	5/21/2008 10:36:57 PM
From: John Vosilla	Read Replies (1) \| Respond to of 306849

'Why rising inflation will trigger a bond market rout Sunday, May 18 - 2008 at 13:59 In bailing out the US housing and banking sectors with a huge monetary injection the Federal Reserve has released the genie of inflation. Goldman Sachs sees oil prices of $150-$200 within the next 18 months as a result. And if inflation gets out of control central banks will have to raise interest rates and even a whiff of that possibility will mean a big sell-off for bonds. For who will want to hold US treasuries that are falling in value as well as paying low interest rates in a depreciating currency? The risk of a rout in the US treasury market is therefore a very real one. This would have a highly damaging impact on the balance sheets of global central banks which have huge amounts stashed in so-called safe US treasury bonds. There has already been a gradual shift out of these dollar-denominated assets in response to the devaluation of the greenback. But in a real bond crisis that trickle would become a flood. Bond sellers would be buyers of higher yielding currencies, quasi-money assets like gold and silver as well as hard assets in the form of commodities from energy to food. Terrible investment The problem is that as Dr Marc Faber argues bonds could well prove to be currently the worst value as a major asset class in 30 years. They pay a miserable return in a devaluing currency and are highly vulnerable to capital value erosion through inflation. Indeed, the way the market works ensures a rapid re-pricing of bonds depending on inflation and interest rates, which will have to be adjusted to dampen inflation. If inflation goes up the market begins to anticipate higher interest rates, and so the price of bonds goes down. Hence if inflationary prospects are judged to have significantly risen, then the risk to bond prices is obvious. And why hold an asset class that is going to fall? That inflation is rising around the world is so blindingly obvious that it is not necessary to quote statistics, most of which are exceedingly misleading as they remove items like food and energy. Oil at $128 a barrel is both highly inflationary and a symptom of inflation in the system. Fed policy But let us not forget what caused this inflation. It has been a deliberate policy of the Federal Reserve to pump money into the system to offset the impact of the housing crash and banking crisis. Unfortunately the well known side-effect of loose monetary policy is inflation, and pumping in more and more money produces more and more inflation.' Message 24607186

To: patron_anejo_por_favor who wrote (124580)	5/21/2008 11:23:00 PM
From: ChanceIs	Respond to of 306849

>>>Otherwise we'll drill, use up the rest of the oil and then be right where we are now, i.e, phucked.<<< How many times do I have to tell you: "Let us accept things as they are, and profit off of the folly of the world." Mayer Rothschild There is no way to maintain our current lifestyle. We will have to build nukes out the ying-yang. Natural gas will be the bridge to nukes. Buy natural gas. All of the switch-grass, windmills, solar panels is by and large a bunch of hooey. Factory towns will come back. Stetson hats used to be produced in Philadelphia. There was a small section of town full of homes that Stetson built for its workers. That sounds a little too much like being a company drone for my taste - but you get to walk to work in five minutes. Sitting in traffic for 1.5 hours one way and paying a half hour wages in fuel would get old really fast. The market - not the federal government - will fix things. In the mean time buy natural gas.