Issues 2004 -- Credit Bubble Bulletin by Doug Noland

PrudentBear.com ^ | 1/9/04 | Doug Noland

[arete]

“Despite sinking yields and risk premiums moving closer and closer to Treasury rates, investors’ love affair with high-yield bonds shows no signs of abating as 2004 gets underway. Though the new issuance pipeline is building, some industry watchers believe the impending supply may not be enough to meet the market’s burgeoning demand, as investors pour more money into higher-yielding assets… Last year set records in the junk sector.

The CRB index surged 4% this week to the highest level since July 1984. Crude oil jumped to a 10-month high. Heating oil had its strongest weekly price gain in 10 months, with heating oil and natural gas trading to 10-month highs. Gold prices rose this week to a 15-year high.

“U.S. consumers can expect to spend 8 percent more to heat their homes with natural gas this winter than a year ago because of a rally in wholesale prices, the U.S. Energy Department said…

Alan Greenspan’s speech Saturday at the American Economic Association’s annual meeting in San Diego – Risk and Uncertainly in Monetary Policy – has not received the attention it deserves. Our Fed chairman forges ahead with painstaking efforts to fabricate an analytical perspective that places his reign at the Fed (as well as the current environment) in a most positive light. . . . Yet “obfuscation” is too kind for Dr. Greenspan’s latest brainchild. For years, I have often pondered: “Greenspan: Inept or Fraud?” Something is just not right. As for his latest, I don’t believe “fraudulent” is either an inaccurate or excessive characterization. “Dishonorable” doesn’t seem strong enough; dangerous "historical revisionism", certainly.

the Greenspan Fed now explicitly promises the massive and expanding Global Leveraged Speculating Community that the Fed will not only avoid moving to rein in excess, it will be quick to stimulate and flood the system with liquidity at any sign of trouble. Well, Dr. Greenspan may fabricate a cheery story, but we have witnessed the worst case scenario unfold before our eyes: The Fed Condoning Runaway Credit and Speculative Excess. The Fox has taken complete control of the henhouse.

One would typically expect the local central bank to move aggressively against gross excess to protect the value of its citizens’ currency. Greenspan has promised not to safeguard our dollar. One would typically then expect the marketplace to discipline a runaway Credit inflation. The Bank of Japan, Asian central banks, and many central banks around the world (ex the ECB) are committed to circumventing market forces. Thus, reckless excess runs unabated. And, again, this massive inflation will appear miraculous until “the wheels come off.”

Watch for Greenspan's unexpected early retirement in the near future. He will get out before the mess implodes.

Richard W.

[Support Free Republic]

Rank	Location	Receipts	Donors/Avg		Freepers/Avg		Monthlies
40	Oklahoma	141.00	7	20.14	199	0.71	126.00	9

Thanks for donating to Free Republic!

Move your locale up the leaderboard!

[arete]

FYI

Comments and opinions welcome.

Richard W.

[farmfriend]

ping

[TommyDale]

I see you are still posting the negative crap. Are you a Democrat, or what? Trying to talk the economy down won't work anymore.

[arete]

I see you are still posting the negative crap. Are you a Democrat, or what? Trying to talk the economy down won't work anymore.

No need to talk it down. The recovery is an illusion based on borrow and spend. It will fall apart soon enough.

Richard W.

[djf]

"Price stability?????"

How come the loaf of bread I like which used to cost about $2.25, is on the shelf now at $3.19????

[Beck_isright]

"Massive Credit inflation is, today, working its seductive wonders, much as it did for awhile during some of history’s infamous financial fiascos. As I have tried to explain many times, the problem is that inflation of this variety – ingrained asset inflation and gross financial speculation - is impossible to manage: It becomes impractical to turn down, let alone to shut off. Excess begets only greater excess, with only more problematic manifestations. Yes, prices of U.S. stocks, bonds, homes, and other assets prices are today inflating, and many have never perceived as much wealth. As fast as liabilities rise, perceived wealth inflates much more rapidly. It appears miraculous."

Don't worry, be happy.

[Beck_isright]

"Watch for Greenspan's unexpected early retirement in the near future. He will get out before the mess implodes."

My bet is within 3 weeks of W's re-election due to "personal reasons" or other...

[sarcasm]

“U.S. consumers can expect to spend 8 percent more to heat their homes with natural gas this winter than a year ago because of a rally in wholesale prices, the U.S. Energy Department said…

Natgas Prices Seen at New Highs Next Week

[arete]

How come the loaf of bread I like which used to cost about $2.25, is on the shelf now at $3.19????

Shhh, you aren't supposed to notice. Just watch the Fox News coverage of Scott Peterson and Michael Jackson and stop looking at reality.

Richard W.

[djf]

Oh, ok, I'll go back to sleep now.

;-)

Been watching Ag? Methinks there is a short squeeze in progress, if so look for $30/oz.

[steve86]

How come the loaf of bread I like which used to cost about $2.25, is on the shelf now at $3.19????

McDonalds in this area raised some prices about 8% under the guise of an increase in the minimum wage of 15 cents an hour. What I would like to know is how something that takes a minute of labor (or 1/60 of 15 cents) can result in an 80 cent increase in a ten dollar order? Stealth inflation.

[arete]

Not only do I not believe the Energy Information Administration that storage levels are at healthy levels, but we are now depleting our reserves and will be unable to meet demand in the near future.

Richard W.

[sarcasm]

My co-op has a dual system - oil/natural gas - we switched to oil this morning to save money.

[SierraWasp]

Geeze! For a second, there, I thought the title said: "By Doug from Upland!!!

[arete]

With oil at $34, it will end up being awash. The few dollars you save in heating, you end up giving back at the gas pump. Energy prices are increasing pretty much across the boards.

Richard W.

[bvw]

Why do you think he will be able to predict when the implosion happens? If you mean he's leaving soon ... I don't know. Watching a slo-mo train wreck is very affixing. He'll have a hard time giving up his cat bird seat.

[LowCountryJoe]

What's your thoughts on a speculative play using the NASDAQ-100 Volatility Index (QQV)?

[EVO X]

How come the loaf of bread I like which used to cost about $2.25, is on the shelf now at $3.19???

Where are you buying the bread at, 711? I can find 100% wheat bread for around $1.50 or so..