Originally Posted by host

Within a year, the dollar will buy more, as the prices of everything else, including oil, gold, stocks, and real estate fall to a lack of demand.

The first phase seems likely to be an inflationary recession, deteriorating into a severe stagflationary recession, eroding further into a deflationary depression.

No matter how the Fed postures, it is trying to encourage inflation in reaction to massive systemic debt and discourage the deflation trend that collapsing demand predictably triggers. When demand is sharply reduced, sellers become more willing to sell at any price.

All exporting nations will attempt to reduce the valuatiions of their currency, a competititon in which the US has an enormous head start.

The Fed is also trying to persuade asset holders not to sell. Now seems to be the best time to sell everything. The "obvious" move on friday was to buy Bear Stearns near the close, at it's new low price of $30, and sell march call options, which expire at the end of the coming week, for at least $600 each.

Those who did that trade ended up paying $24 net for each share of Bear, and they lost $22 per share today.

The likely scenario tomorrow in the US market is a lower opening, morning trading down, and a tradeable bounce up before the close. That seems less obvious than a lower open and down, down into the close, especially with the expectation of a 3/4 pt. or more Fed rate cut announcement coming the next day.

None of the Fed rate cuts so far have done much but pressure the dollar's exchange rate down. This isn't about interest rates, it's about deteriorating credit quality. All of this will trigger rising unemployment. Then the downturn in housing valuation will begin to be driven by fundamentals other than the mislabeled "subprime loan" crisis.

Before tomorrow, stocks like KBH and CTX were still in the 20's, good stocks to buy put options on, or to shortsell to attempt to neutralize the risk of dropping valuation of your own homes.... Before this is all over, I doubt that CTX will avoid BK....too much debt.