Morning Henry,
After reading various sources, working with and watching the charts, I've come to believe and hold the opinion that there is an inherent change taking place in the international investment community.
This piece from the times sheds some light.
Message 15147291
As we both know the last few years of USA growth are the byproduct of productivity enhancements, new age economy pundits and the fuel was the investment capital flooding into the USA markets from every corner and which was based on the fear that Japan and Europe were not sound places for investments..., and Greed (miss an opportunity...?).
The whole world has just participated from 1998 in an incredible period of financial speculation, now the world must correct. This cycle is going to be a long..., drawn-out, sideways to down equities markets and a slow easing of the speculative wheel. Very difficult to trade and frustrating for longterm equity holders.
The scenario has changed and a fundamental restructuring of that flow of capital is just beginning to take place. The USA may stay relatively strong for a few more months, but buy the 2nd quarter or its end, more weaknesses will become evident as pressures from capital out flows, high oil prices and general weak investor sentiment begin to reflect this change. I expect the Euro Dollar spread to reach parity, the Swiss Franc to rebound in value,gold to modestly increase in value and the Yen to remain weak. USA rates to remain high, oil prices high and international capital flows to drop dramatically.
Bear markets never declare themselves when they start. The turn is always a reflection backwards. But the USA's market down trend that's in place will continue and reflect a long drawn out recession similar to that after the postwar boom. It will be a dollar drain based on a changing perception of the USA's strength and fundamental economic stability.
This changing scenario will be fueled by high oil prices (supply problems), deficit problems, lowering of surplus projections, political polarization, electrical generation complications, generally tired consumer, intest rates will remain high, a credit squeeze hurting banks, etc, etc.
>>. 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.<<
I agree with this statement completely, we are on the edge of a major restructuring of the investment psyche. This is not a crash or a serious recession, but a long drawn out bear market. George "W" will not be a major player. Only the late night comedians will in for a gold rush.
The sell off after Greenspans rate cut was the latest indicator of this change..., along with the increased posting by Henry Volquardsen. <smile>
Chip |
