18 replies to this topic

[Sentient Being]

I think it's time for some money to flow out of equities and back into bonds and commodaties, at least for a short term and I've now got several bets on that. Quite frankly, these conversations about how money is created, complicated financial instruements, leverage, etc etc are beyond my understanding. What's clear is that people who do beleive they understand them, disagree.

[PorkLoin]

Greenie, I agree that the spread between gov't bonds and corporate bonds, especially the junky ones, will widen at some point.

For a bet against junk bonds, I watch this fund for one. "Junk" is still doing pretty well...


Doug

[pdx5]

Mark has it pretty much covered. Doomsday permabears end up broke. My main point of view (POV) is that there are limits to liquidity/credit/cold cash creation since to create credit, THERE HAS TO BE WILLING BORROWERS. Even the Federal Reserve can not sell Repo's to banks if banks can not find willing and able borrowers. IF house PRICES stagnate or business slows down, there are fewer willing to borrow. Add to that defaults and the credit totals could actually shrink in a recessionary environment. The stock market will then decline. But, as Mark says, these events occur slowly and odds of a huge crash are remote at best.

[jawndissedi]

What is the practical difference between availability of credit and the availability of cold hard cash in a fiat currency or fractional reserve system?

Maybe you were out sick the day they explained this in graduate school?

[OEXCHAOS]

The operant term was: PRACTICAL difference. To my mind, they both work similarly, except that the availability of credit in a fiat based system is more readily controllable by the powers that be. Mark

[briarberry]

Cassandra - I beg to differ, this does sound like the folks on this thread

In more modern literature, Cassandra has often served as a model for tragedy and Romance, and has given rise to the archetypical character of someone whose prophetic insight is obscured by insanity, turning their revelations into riddles or disjointed statements that are not fully comprehended until after the fact.

I doubt many subprime borrowers have ever heard of Cassandra. If you told them that there was an over leveraged elephant trying to hide under their rug, they'd think you were a crazy fella

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[greenie]

Best to your trades Mark, and thanks for the advice.

[OEXCHAOS]

Greenie, Your attribution of my background is incorrect. That said, nobody has demonstrated any practical difference per my observation, but I'll keep waiting for someone to do so. One other thing of import. Folks should feel free to ignore my analysis of econometrics. I don't do that for a living. I DO have 25 years of experience trading my own money and the money of others. I've made most mistakes once or twice over the years. The worst one I've ever made was getting too bearish based upon a pessimistic fundamental read. I've NEVER been too optimistic in any meaningful sense. If you want to have a bit of insurance against disaster, do it. No harm no foul, but don't be making big Bearish bets or fail to make Bullish bets that make technical sense based solely on whatever doomsday scenario you're buying into. It'll cost you money and huge opportunity. Mark

[briarberry]

cedit allows retail gamblers to lose their future earnings, as well as all their savings