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Strategies & Market Trends : Raptor's Den II

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To: da_cheif™ who wrote (529)	4/22/2003 10:37:02 PM
From: KevinThompson	Read Replies (1) of 3432

Part of today's Market Wrapup at Financial Sense Online: "... The Dollar is the Key I believe the real answer to where the markets are going is all contained in the U.S. Dollar, and today it got pounded! The U.S. Dollar Index dropped almost a full percentage point today to close at 99.05. Demand for dollars has slowed as analysts have cut back their profit estimates for the balance of this year. Declining investment by Europeans and Japanese in U.S. stocks and corporate bonds would sink the dollar because our country needs $1.5 billion in foreign capital per day to offset its current account deficit. The biggest components of the current account deficit are the international trade deficits and the Federal Budget deficit. We will need a much weaker dollar over the course of many years to get the U.S. Current Account back into positive territory. This is an ongoing process, not a singular event. The bulls can go have their fun in the stock market for now, but I believe they will all sober-up once the “dollar reality” comes to full light. I don’t think it will take much more time since the U.S. Treasury needs more money they don’t have. Tomorrow the Treasury will offer $27 billion in two-year notes…remember, that means borrow $27 billion! In addition, the Treasury will announce the details of its quarterly refunding auctions next week. The total package of debt could exceed $60 billion, far exceeding the previous record of $44.5 billion back in 1996. The government’s borrowing needs are surging due to domestic programs, terrorism and the war in Iraq. The need for increased spending comes at a time when tax receipts are significantly lower (call that reduced government income). The need for heavier borrowing with lower income will put big downward pressure on the dollar. When the dollar reality hits, stocks should start their tumble once again. If the dollar reality isn’t enough, let’s see what the Fed’s Beige Book says tomorrow about the economy as a whole. Copyright © 2003 Mike Hartman April 22, 2003 "

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