Hoisington outlook

[Architect]

The folks over at Hoisington have a quarterly newsletter that's always worth reading, as they take a short to medium term look at economic conditions.

http://www.hoisingtonmgt.com/pdf/HIM2008Q4NP.pdf

They make a case that this isn't your typical post-war recession. The key being that while the Fed is trying to start a new borrowing/spending cycle, the velocity of money combined with existing over-indebtedness (along with bad debt) is overwhelming that effort.

Enjoy

 

[murg]

I found this article interesting. The first chart is illuminating, US debt as a percentage of GDP is 358% now compared to 299% in 1933. The debt deflation that occurred after 1933 lasted over 20 years! Their opinion is that the stimulus may not be enough to counter what we all agree has already begun, deflation. They suggest bonds outperform equities for the next 10 to 15 years... I honestly don't know. The Fed is well aware of this potential and have said they will do whatever is neccessary to avoid it. It could work, if it doesn't they are going to make things much worse in my opinion because eventually taxes will have to go up to pay this additional debt. Does anyone else have an opinion? Will the stimulus change the psychology? Will the majority of consumers and business's that went in debt over the last decade and have been burned by foreclosure and bankrupcy go right back to living beyond their means? I think that is why there is such an emphasis on speed right now, the pain has been limited so far, nothing like the depression. The more pain inflicted the more likely an entire generation will truly change their mindset save with a vengence.

 

[Hamlet]

Has anyone noticed that long term treasuries have corrected fairly substancially in the last couple months?

I think the 30-year treasury peaked at about 138. It is now just over 114. That's a 17% decline for people who bought at the top.

It appears the market is starting to rethink the idea that deflation is going to be rampant.

It appears to me like the Treasury bubble is starting to pop.