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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: Wyätt Gwyön who wrote (561)4/30/2003 12:48:49 PM
From: GraceZ  Read Replies (1) of 4912
 
were hesitant when US assets were cheap, but bought in big at the top.

Well now there you go, you not only dispelled that guy's thesis that the capital flows from foreign trade partners (which they had no choice but to put into dollar denominated assets or see their currencies rise) were what caused the asset bubble and dollar rise here in this country but you also touch on the real reason that the dollar has fallen off it's peak (meanwhile the trade deficit rose and has only recently moderated). If I read you correctly you are you saying those dollars from the trade deficit didn't come back here to be put in our securities markets in any great way prior to 1999 or so? We've had a huge trade deficit for eons. Throughout the 70s the Japanese were being shipped boatloads of dollars. What did they do with them?

now they are piling into one of the worst asset classes on the planet at a huge cycle peak. it'd be hard to come up with a worse allocation scenario if one tried.

Certainly this has more to do with dollar weakness then anything else, the growing realization that dollar denominated bonds can not possibly continue to give the great returns they gave while interest rates were falling and there might be a place that provides a better return. Some place with maybe a higher interest rate (name those currencies). While the little guys foreign and domestic run up bonds, the pros will take their money out. This happened in spades from 1999-2000 in the equity markets, as prices rose the money flow was decidedly negative.
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