16 replies to this topic

[pdx5]

and I tend to agree with that viewpoint. This tinkering with rates is what gave
us the credit bubble. We don't need to start building another one for future.
Housing will stabilize in 2008 since people can't live in trees. Glad to see cooler
heads are around in the Fed groupies.

http://www.bloomberg...6...&refer=home

Edited by pdx5, 08 September 2007 - 07:08 PM.

[nimblebear]

AMEN !

I wish he were the head of the FED. We ABSOLUTELY do not need a rate cut. The market keeps begging for one.

Look at oil prices.
Look at overall inflation.
Wheat prices are setting records daily.

You are right. Those stupid rate cuts caused many people to become complacent about risk. It was the proverbial "put" under the market. Why do people think we can reflate our way out of everything ?

Everyone knows that is what caused housing to appreciate at an unsustainable rate over the past 6-9 years. The money managers and bankers and financiers need to be forced to take a step back a bit. The credit markets are doing what they are supposed to be doing. They are freezing up, until things become more transparent. Businesses, lenders, people involved with loads of money need to re-build their credibility. Why would investors/lenders make loans if they know there is a high probability it won't get paid back ? A lot of people went way to far, stretching with no doc loans, tranching and slicing and dicing with CDO's, creating vehicles and transactions that didn't exist only just years ago. They sucked Moody's and Standard and Poors and everyone else into believing there was little risk.

Sure some people are getting hurt right now because of the new credit dynamics playing out. But had it kept ongoing the eventual bust would only hurt even more people.

So yeah. Keep the rates up. Don't bail out these folks who knowingly took major risks, and tried to mitigate it with financial shennanigans.

Edited by nimblebear, 08 September 2007 - 09:11 PM.

[tommyt]

"Housing will stabilize in 2008 since people can't live in trees".

I don't know, looks pretty good actually:

[pdx5]

"Housing will stabilize in 2008 since people can't live in trees".

I don't know, looks pretty good actually:

[OEXCHAOS]

I have a question.

What do YOU know about inflation that the long bond buyers don't?

Looks to me like they think that inflation has dropped by almost 90 bp.

When the largest expense/asset anyone has falls 20%, that's not inflation.

Mark

AMEN !

I wish he were the head of the FED. We ABSOLUTELY do not need a rate cut. The market keeps begging for one.

Look at oil prices.
Look at overall inflation.
Wheat prices are setting records daily.

You are right. Those stupid rate cuts caused many people to become complacent about risk. It was the proverbial "put" under the market. Why do people think we can reflate our way out of everything ?

Everyone knows that is what caused housing to appreciate at an unsustainable rate over the past 6-9 years. The money managers and bankers and financiers need to be forced to take a step back a bit. The credit markets are doing what they are supposed to be doing. They are freezing up, until things become more transparent. Businesses, lenders, people involved with loads of money need to re-build their credibility. Why would investors/lenders make loans if they know there is a high probability it won't get paid back ? A lot of people went way to far, stretching with no doc loans, tranching and slicing and dicing with CDO's, creating vehicles and transactions that didn't exist only just years ago. They sucked Moody's and Standard and Poors and everyone else into believing there was little risk.

Sure some people are getting hurt right now because of the new credit dynamics playing out. But had it kept ongoing the eventual bust would only hurt even more people.

So yeah. Keep the rates up. Don't bail out these folks who knowingly took major risks, and tried to mitigate it with financial shennanigans.

[JAP]

and I tend to agree with that viewpoint. This tinkering with rates is what gave
us the credit bubble. We don't need to start building another one for future.
Housing will stabilize in 2008 since people can't live in trees. Glad to see cooler
heads are around in the Fed groupies.

http://www.bloomberg...6...&refer=home

Agree, but not with your 2008 housing comment. When the ARMs reset, there well be many more foreclosures and prices will continue dropping. Tightening of the lending standards and rising inventories will exacerbate the decline. It'll be another 3-5 years before housing stabilizes.

[Pabst]

Don't confuse falling Treasury yields with expectations of inflation subsiding. Bonds are “free parking”. That's all. Where were yields in June? Let's say you live in a mansion. A gang of killers enter your home. You take off running and find safe refuge in a dilapidated trailer down the road. Where would you rather stay? Well, for the time being that shack is better than a manor.

[relax]

last year Fed went from raising rates to going on hold, without it really affecting inflation so I am sure that Fed cutting once or twice will have no impact on inflation and the inflation we are seeing is really something which has nothing to do with interest rate levels

[OEXCHAOS]

Don't confuse falling Treasury yields with expectations of inflation subsiding. Bonds are "free parking". That's all. Where were yields in June?

Now wait a minute. You're honestly telling me that people PARK money short-term in Long bonds? The 5 year is only 30 bp less and principle is much less subject to interest rate fluctuations. Money markets, with little principle risk are yeilding 5% plus or at least very close to the long bond yeild.

What would the the rationale for PARKING money in the long bond unless you were confident that inflation was not going to be a worry, especially when there are so many "lower risk" alternatives yeilding about the same?

To conclude that the Long bond isn't priced heavily upon the expectations for inflation is a grave error, in my view.

Mark

[thespookyone]

I find Marks comments telling, and won't speak for him. For myself, it is DEFLATION that looms, not inflation Most peoples most important asset class-their homes-has already taken a big step in this direction, and considering the overall interplay, I feel commodity prices will soon folllow suit. A weaker US consumer going forward will also add to the effect. Many site global growth rates, especially China, when viewing inflation-but lets not forget for a moment who is buying those Chinese goods. Spooky