You guys have been going for it.

The thing I love about you Prudent is that you just don’t quit. A very admirable quality.

I do agree with Icon, I think your analysis is shallow. You are ignoring debt levels, risk aversion/sentiment changes and deleveraging/debt deflation and wealth destruction.

What concerns me greatly, is that I don’t think you are reading and accepting what Steve and the other bloggers on this site (and other bearish sites like Mish) are saying. I don’t understand why you bother reading this site. You do not seem to accept any of the theories proposed.

You may well be right, time will tell. Certainly to date there is no leading indicators or recent historical data to support you predictions.

My fear is that you have taken huge bullish positions based on your predictions. I try to trade just like that. That is, predicting the future as opposed to following the herd. Well in theory anyway!

Please take care. The Macro economy and sentiment measures are crashing. These are leading indicators for falling demand. These do not support a quick turn around.

Despite this, I do expect a large multi month relief rally in equities and commodities during 2009. But I expect it to be all bad, very bad by the end of 2009. Anyway, what do I know?

Please be cautious as the bears are ruling and that trend has not changed yet. Despite what CNBC and all the “hope it will improve soon” crew says.

they will of course steralise those purchases.

This whole game is going to be played out in the forex market, with readjustments in some currencies but not others that are fixated on pegging to the U.S.

It may all end up in trade tensions and resolved under the WTO, on the other hand the Black Swan always likes to show itself during these times, and it could all turn very nasty.

http://www.economist.com/finance/displaystory.cfm?story_id=11402856

the Fed has purchased MBS, CMBS, high quality commercial paper, major stakes in the recapitalised banking and insurance industry all with significant haircuts, which are also earning them money as well.

The toxic junk is already written off, the tax payer will cop that fair and square between the eyes!

Anyone who suggests that ballooning of the Feds. balance sheet represent inflationary pressure or the Fed monetising the deficit simply doesn’t know what they’re talking about. Banks are sitting on the reserves, not withdrawing them as cash. When markets settle down, the Fed can and will absorb those reserves back in with sterilising sales of Treasury securities, just as it did in 2001 or after the more modest spike in August 2007.

Providing new reserves aggressively is absolutely and unquestionably the way the Fed needs to respond to this kind of development.

ned, my take on that matter is that the fed only needs to worry about those assets after the economy recover, and then value will recover to the toxic waste to, perhaps, but not likely making them a profit after adjusting for inflation, it will then help them take money out of the economy.

China has the potential to take up the role of a the world hegemon in the future, no doubt about that. However, they are not there in the here and now, and there are many things that can go wrong with the CPC plans. What matters is what is happening now, not may happen in twenty years time.

I think this is somehow interesting:

http://vixandmore.blogspot.com/2008/12/double-tops-in-vix.html

I think we are in something that mirrors 1998, and are on the way out. There was a huge problem with inflation earlier this year. In my book, inflation ends when interest rates are raised. That have not happened yet, so I assume that bonds will sell off like in 99, and will flow into something, that will cause a bubble, I just don’t know what yet. That will cause interest rates to go up, and then the inflation we did see in june will be killed in the traditional fashion.