Re: [A-List] Bubble Everywhere

["Anyutka" <annewilliamson@xxxxxxx>]

An excellent analysis of where we are at in today's markets.
It's the logical conclusion of a paper currency system, every
one of which no matter where or when or by what entity
established has returned to its intrinsic value - zero.  Good-bye
'dollar standard'.

Since holding cash is not attractive in a world of devaluing
currencies, people interested in wealth preservation only have one place to
go today - gold, the only asset which is not someone else's liability.
But if you don't trade it, then the income problem is not solved except
over time as the investing public slowly but surely sees the handwriting
on the wall.

Anne

----- Original Message -----
From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>; <a-list@xxxxxxxxxxxxxxxxxxx>;
<TheNewForum@xxxxxxxxxxxxxxx>
Sent: Monday, July 07, 2003 11:48 AM
Subject: [A-List] Bubble Everywhere


> The burst of the equity bubble produced the bond bubble and the housing
> bubble. As investors fleed the stock market, funds poured into bonds,
> bidding up prices and lowering effective long-term interest rates.  As
> the Fed lowered Fed Funds rate targets, low mortgage payments pushed up
> housing prices, producing a housing bubble.  The burst of the bond
> bubble will threaten the housing bubble, the bursting of which will
> exacerbate aggregate demand in construction, for labor, for home
> appliances and supplies, which will in turn affect corporate earning
> which will torpedo the current "recovery".  The collapse of the Japanese
> bond market will also force the Japanese to sell US Treasuries, adding
> to the problem.  The smart money is already borrowing short term,
> through the repo market and its related instruments, to invest in
> 10-year treasuries. Another debt bubble is building.
>
> Bubbles are now pathological.  Fund managers are all forced to respond
> to quarterly results.  Herd behavior is a given. The aim is to beat the
> market, not to invest in the market. S&P Fixed Income Committee has just
> recommended a cut back of 5% on 10-year bonds in fixed income
> portfolios, in response to falling bond prices. The 10-year bond is now
> a terminal instrument in that the rate advantage in the currenct
> deflationary period is not expected to compensate to the price fall due
> to eventual inflation over its 10-year life span.  Thus 10-year bonds
> are now a short-term trading instrument, not a long-term investment
> instrument.  In fact, if you do not follow the market daily, you have no
> business being in the market.  So long to the long term investor.  When
> all investments are short-term, it is a trader's market, turning the
> economy into a horse race.  The difference is that in a horse race, the
> betting odds on a horse do not affect its performance. That is not true
> in an economy driven by equity and credit prices.  The whole market can
> bet on the wrong sector and make it a winner in the next quarter, but it
> may finish last in the race.
>
> Wealth preservation is now a losing game.  Asset is becoming a
> liability.  Income is all.
>
>
> Henry C.K. Liu
>
>