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To: gregor_us who wrote (82526)	9/19/2009 6:32:10 PM
From: Dale Baker	Respond to of 118717

Very interesting piece, thanks very much for bringing it to our attention.

To: gregor_us who wrote (82526)	9/19/2009 7:35:35 PM
From: Crossy	Read Replies (2) \| Respond to of 118717

Gregor, let me chime in with an observation on "levels" of debt. It's difficult to gauge what should be the "right" form of debt. Simply because a developed market economy has many more different ways to store and accumulate wealth than simple "savings" products. If I buy stocks, mutual funds etc- this isn't normally calculated as savings - but it'S certainly not consumption either. So I'd say, it's different to compare debt/GDP ratios of Bangla Desh and the US. Another matter is debt of businesses. Usually - there's an economic incentive to accumulate debt, if your corporate taxes are high. The U.S. has among the highest corporate taxes in the world. But if you issue debt or some special kind of preferred shares (trust preferreds) then your interest payments are tax deductible. The leveraging up to purchase CMO/CDO/CLO paper and other asset based lending transactions by onshore U.S. incorporated institutional investors can be viewed alongside a similar motivation - i.e. tax efficiency. In a jurisdiction with low or zero corporate tax rates, one should expect debt levels to be lower as well. Of course, higher debt levels mean more risk and with banks using their balance sheet to invest into asset backed paper, this of course means market risk - especially in a "mark to market" environment. Interestingly, far away from financials, technology companies learnt their lesson of the risk consequences of debt during the technology meltdown of 2000/2001. As a result of this learning process, many tech companies today have very low debt levels. Household debt is a different matter. The only explanation apart from financial illiteracy is "wealth effects on consumption". Imagine someone with an "asset based lifestyle", whose major income is capital gains - he holds position longer (1 year) to qualify for the "long term" rates (15%). If his portfolio worth increases, he might do himself a favour once in a while - totally unrelated to his salary from his main, daytime job. Of course this reasoning is from the easy, convenient position of an ex-post facto rationalization. There must be more "motives" and sensible explanations why debt levels in the U.S. are higher than elsewhere.. rgrds CROSSY

To: gregor_us who wrote (82526)	9/20/2009 2:55:49 AM
From: pogohere	Read Replies (2) \| Respond to of 118717

All we have to do is ignore the continuing inability to finance the debt we refuse to expunge from the banks' books and ignore our inability to create/finance even more debt of the same type and everything looks great. Even to Jim Grant. Some rosy scenario. Whodda believed anyone would believe that?

To: gregor_us who wrote (82526)	9/20/2009 10:27:09 AM
From: Wyätt Gwyön	Read Replies (3) \| Respond to of 118717

in early 1980 Grant topticked the gold bull market as he stood in line to buy Krugerrands north of $800. (to his credit, this story is only known because he told it himself.) with this article i think he's got a good chance to toptick the current rally. there are virtually no bears left (besides Prechter, natch). Grant seems to be taking all his cues from ECRI, whose leading index is basically the SPX. the SPX has a huge rally, ECRI predicts a huge recovery, what a surprise. from the article: The world is positioned for disappointment. i'm not sure how the sharpest rally in major indices since 1930 indicates the world is "positioned for disappointment". who cares what Bernanke or other bureaucrats say. money has discounted a huge recovery already, so it's not like you can go out and place bets on equities and have reasonable expectations for another big run to the upside. not to say a further rally couldn't occur, but i think it would be more like Nasdaq 1999 than SPX post the 1987 crsh. (of course, people who lost half their money last year are praying for a further rally, but that is because they are desperate to get back to where they were two years ago, not because it is a low-risk trade.) Gregor, i am with you on the debt thingy. people have so much debt relative to income and asset values that an incremental gain in income doesn't matter much. Does Grant surprise you?* yes and no. i think his analysis is superficial and overly dependent on ECRI, which is surprising. otoh, we've seen a lot of bears capitulate over the past few months, so it is kind of par for the course. otooh, being a permabear is so fundamental to Grant's identity that it's a surprise. you would think this would be the moment where he'd press the theme, not give up. oh well, people change. we'll know for sure when the winter issue comes out with the cartoon. if it shows bulls skiing instead of bears on the ice rink, then we truly live in a changed world.

To: gregor_us who wrote (82526)	9/21/2009 5:59:16 AM
From: Madharry	Respond to of 118717

I dont understand grants argument for being bullish. Why would he compare the situation today with the depression? I dont see the similarity. The depression marked a period of time where people pretty much stopped spending and large portions of the population were destitute. Here we have a situation where consumers were forced to cut back on their spending and the fed has thrown money at everything that moved. Should the fed stop throwing money, which it kind of is in the sense that unemployment benefits for many have stopped, there is no assurance that the economic recovery continues. On top of that retirees may rein in their spending as well because their income has declined because of reduced returns on money market and savings accounts and stable social security while medicare costs increase. Also, I would think that there will be increased uncertainty about buying real estate going forward, although if the fha is willing to finance 96% of the purchase price I admit that is not a great risk, compared with the tax advantage. But I dont think anyone but a retiree is going to put anything like 20% down anymore. If anything this recovery is contingent upon the continued health of the stockmarket and continued monetary expansion, as well as foreigners continuing to buy our debt. I doubt we will see too much in new home construction for several years. Despite my current technical bullishness on the stock market I am fearful of owning banks stocks or those related to construction.