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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Chip McVickar who wrote (2859)	1/5/2001 4:43:08 PM
From: Henry Volquardsen	Read Replies (1) of 3536

Hi Chip, nice to hear from you. Let me start from the latter part of your post. I am not as concerned about a Bush administration. I'm not saying this as a Bush supporter, I'm a Libertarian and voted that way. And not being concerned about Bush is also not an endorsement of all his policies. What I think is that both parties tend to be governed by polls and that pushes them towards the middle and the practical differences between the parties are a lot less than the spinners would have you think. Re the budget surplus. My first priority would be debt reduction and I would like to delay tax cuts. That said however I think the scope of cuts we are likely to get are not likely to spend the whole surplus. The surplus is the product of broader economic and demographic trends and I think they will continue to be powerful forces. I'm not worried about the Bush proposals re social security. A lot of responsible Democrats have also supported partial privatization as part of comprehensive reform. What finally emerges will not be Bushes initial proposal but something with bipartisan support. You say the International Psyche has also changed and it's view of USA political policies is undergoing a dramatic alteration. They liked Clinton for his moderate -- centrist positions and now fear the isolationist -- conservative polarizing tendencies of Texas and the Bush Folks. A couple of thoughts. I think the international community is much less interested in ideological issues, at least when it comes to investing and cash flows, than it is in continuity and consistency. And I think they will get that. Also I think investment flows to the US, and anywhere else, has more to do with long term economic and cultural trends. And the nature of the US is that these economic and cultural trends are more powerful than political interference. I think a focus on political leadership, particularly in the US, is overestimated. You say that this emphasis on Bush will cause the international community to Sell the Dollar -- Sell our Bonds -- Buy the Euro -- and Buy their own Economies. Oil/Gas prices will remain high -- Gold will gain in value, along with the Swiss Franc and Euro. Disagree. Sell the dollar? Definitely not long term vs the yen. Japan remains a nightmare. Vs the Euro? Certainly in the short term, the dollar has been very strong against the Euro. But in the longer term I don't agree. A) the Euro has its own structural issues B) if the global economy weakens there is a strong faction within the Euro that would aggressively support using a weak Euro policy to promote exports. Buy their economies? They have been living off high US demand. If the US weakens it will put a big crimp in their own growth. Gas prices will remain high, I'm not as sure about oil. Gold? I remain a big bear on gold. I see no long term argument for gold. As may be obvious I am in the camp that says if the US catches cold the rest of the world will catch pneumonia. So while I might be bearish on the US that would only make me more bearish on most of the rest of the world. back to the start of the post. I do agree that the US is in for a tough period. There is a question of what will spark new demand and there remains a lot of excess to be worked off. I probably have a short time frame than you on how long this will take and what will do it but I will not be shocked if it takes as long as you suggest. But I do think perceptions re politicians will ultimately have little to do with it. Henry

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