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Politics : Ask Michael Burke
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To: NOW who wrote (83161)8/21/2000 6:15:13 PM
From: Earlie  Read Replies (1) of 132070
 
Davidd:

Yes, the apparent reduction in manic borrowing by the U.S. consumer and the impact this will have on both the U. S. as well as global economies, was the main point of the note. A continued reduction of borrowing would spell the end of this bull market. Most signs that I look at suggest that this is what is just starting to occur.

The fact that the U.S. dollar hasn't yet been whacked doesn't mean that it won't be. Many investors remain comfortable because so far, the inflow of foreign money has been sufficient to make up for the staggering trade deficit. Most don't look at the specifics as to the makeup of that incoming flow of funds. If it were just foreigners buying up expensively priced U.S. stocks, I wouldn't worry too much, but it is much more than this. It's the heavy borrowing by U.S. corporations that worries me. Imagine what would happen to the carrying cost of those loans if the dollar does depreciate. And then there is the matter of the already soggy U.S. balance sheets, already weighed down with excessive debt.

Best, Earlie
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