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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 672.04

-1.7%

Nov 13 4:00 PM EST

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To: Zeev Hed who wrote (49481)	5/5/2000 5:25:00 PM
From: Haim R. Branisteanu	Read Replies (4) of 99985

Zeev, it is actually $100 billion per quarter if you add commercial loans from all banks. The US GDP is around $8.5 trillion, or $2,125 billion per quarter. 5% of it is around $100 billion. So there is negative cash flow with most of the companies as all the expansion is based on borrowed money. Take into account that average profits (and free cash flow) are around 3% of sales and you will understand why the need of so much credit. In an high tech environment the cash flow is similar to profits so now you may understand why the profits reported to shareholders are not the actual profits earned and why massive borrowing is needed to maintain growth. The whole US economy is a bubble and will stay so, as long as foreign money will stay in the US. That is the essence of the monetary policy of this administration of a strong dollar ...... and keep the bubble afloat!!!! and forget Monika <G> Remember my ROBBER BARONS post? Total US assets are no more than $45 to $46 trillion of which around half is in real estate, which is rising around 5% to 7% a year, national debt is around $6 trillion stock market $17 trillion and total commercial and personal debt another $17 to $18 trillion (all in round numbers). So after adding all those "PAPER ASSETS" it is not a lot of value left, to support the debt. In normal times the stock market was 0.7 to 0.8 of GDP which will bring it down today to around $6 to $7 trillion and commercial and personal debt another $8 to $10 trillion. Therefore the US has an excess of paper assets of around $20 trillion not counting a recession which will bring this number to around $30 to $35 trillion in excess or worthless paper ...... real estate like in 1992 at 1/2 of the present price and stock at 0.5 of GDP. (just remember the world GDP is around $35 trillion) If the market would be priced at historical average as mentioned above, for the same cash flow and assets we have now, the "old era" valuation would bring the total assets to around $35 trillion but with half the present debt which will be easy serviced by the present cash flow of the US economy and borrowing will go back to your assumption of around 30% of GDP expansion. What the growth in borrowing indicates is that the "New Era Economy" is not supported without massive amounts of debt and the so called "Wealth Creation" is nothing more than robbing the world citizen of their hard earned money. Actually it should be obvious that companies who are not profitable eat up the capital given to them by those naive or ignorant who supply the money. This would apply to almost all "New Era Internet related Companies" with huge market caps and huge negative cash flow. Eye ball count does not put a meal on your table nor does it generate any tangible products, but there are many willing to pay up for it. it is a musical chair game or ponzi scheme , what ever you prefer to label it. Even established companies such as CISCO are involved in this ponzi scheme which was made possible also by the "pooling of interest" accounting gimmick. That is why I called the promoters of the "New ERA" the new ROBBER BARONS. BWDIK Haim

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