Still Fighting last War........

I cannot help but feel everyone and his mother-in-law is fighting the last war. What I mean by this is the following:

• If you watch CNBC, the talk of inflation is incessant and non-stopping. And with Crude Prices and Gold prices going up on a daily basis, the talk is simply getting out of control. But is it possible that crowd is wrong once again. If inflation is getting out of control, how come it is not showing up in 10 year T-bond, which is stuck between 3.55 to 3.9 %. In this fight between crowd psychology and Bond market action , I am with Bond market. I feel at this point DELFATION is still a problem, as the interview, I posted earlier, with David Rosenberg of Merrill Lynch indicated. As David Rosenberg, said :Inflation is a Lagging Indicator The time to worry about Inflation was last year and not this year. So all the fighting and shouting in the media is about what happened and to some extent what is happening. From my perch, right now Crude is trading more on pure price action rather than on Fundamentals. Except to see, Crude reach 70 to 80 by April.
  
• The other war, lot of Wall-Street firms are fighting right now is, suddenly having risk managers. Morgan Stanley, Citigroup and other companies are all now talking about Risk Managers. Question, is of the companies focused on Risk, how many really survive this hit from Credit Crunch. It is my opinion that give the losses that are yet to be accounted for, it likely some of the IBs will be out of business. For example, most companies are assuming that housing prices will decline some where between 7 to 8% , but in most cases housing prices have already declined by 20%. In other words, the fun is just getting started.


• Dollar value. For most part every one is looking at DXY index, to measure dollar value. Given that Cash is King. A lot of Banks, Hedge Funds, Investment Banks (IB) will be forced to sell the garbage, aka CDO, CLOs and Money losing Commercial Construction loans, and buy Dollars, this should cause the Dollar to raise. Also, with Euro appreciating against Dollar, US has essentially kicked Europe into a recession. This will force the idiot ECB to cut rates, sometime before June. In other words, Dollar should be appreciating against EURO and Pound soon.


• Lately on Radio, I am listening to advertisements about Debts. The ads talk about how they can help, people solve their debt problems with one phone call. I am not sure how many of these actually work, but the only to resolve Debt issues is by not getting into one. In short, as far as debt is concerned, there is no free lunch. The cheap Credit has made lot of people indulge in lot of irresponsible behavior, that include both the companies as well as individuals. Sadly, they are all coming to roost now.

Even though every one wants issues pertaining to Credit Markets be resolved ASAP, if there is one thing I learnt from Dot Com collapse is, only in fullness of time the issues will be resolved. As far as Credit Bubble, unwinding is concerned, we are just getting started........Sadly.