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Politics : Ask Michael Burke

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To: Earlie who wrote (78591)	3/25/2000 10:59:00 AM
From: Freedom Fighter	Read Replies (1) of 132070

Earlie, I've been casually following your back and forth with BGR about foreign holdings of US stocks and bonds. It seems to me that the worst medium term investment I have ever seen in my life is foreigners buying US stocks. Not only are they buying into the US stock bubble, but they are also taking a huge currency risk. There's really only two main ways to get rid of our trade deficit - devalue or go into a recession (or close). A recession would also probably cause a bust in the dollar. So foreigners could be looking at a 50%-60% decline in their equity holdings + a 30% or more decline in the USD. It would be a total disaster for them. To me, not only is that scenario possible, I'd have to say it's way better than a 50/50 proposition over the next few years. It seems to me that over the next 5 years the upside to that bet is very limited and the downside is going broke. Bad odds in my book. Wayne

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