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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: mishedlo who wrote (215403)1/17/2003 3:59:51 PM
From: Mike M2  Read Replies (1) of 436258
 
Mish, my thoughts the primary trend of the US$ is down - current account deficit of 5% GDP is unsustainable, US absorbs 80% of global savings. The story was foreigners were eager to invest in the US new eCONomy ( emphasis on CON) we now know that much of the GDP growth came from statistical adjustments - lower price deflator, hedonics. We also know that NIPA profits peaked in 3Q97 -Dr. Richebacher noted this years ago but few would listen. The NIPA numbers are based upon tax receipts - even AG comment that NIPA numbers are less prone to manipulation. We now see that widely heralded profit miracle was part mirage - very aggressive misleading accounting practices and out right fraud. Dr. R has made the case for years that the notion of maximizing shareholder wealth and overly generous stock options grants gave management to strong an incentive to engage in financial engineering, mergers and acquisitions rather than invest in new PPE - note the current slump in business investment. Moreover, certain areas experienced over investment due to hype - telecon, dotcon, fibercon etc- excellent examples of malinvestments. I can't see the case for a strong dollar - yes there will be interruptions of the trend but the trend is down. With respect to the war question -after desert storm - many expect a quick easy victory - anything less is not priced in IMO . I hope the war does not happen but if it must i hope we have a quick decisive victory w/ minimal casualties. Should Sadam resign or be overthrown- I suspect the dollar would get a short term boost. The military supremacy of the US is an important component of the US dollar - one might even say the US $ world's reserve currency status was paid for in part with the blood of US servicemen of WWII. However, there are times when the fundamentals get so poor and out of balance that an adjustment is inevitable - i feel that we are at that point. Short term anything can happen to the $ - long term its going down. mike
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