Sankar,
I hope that you are convinced enough by your own arguments to rearrange your investments per your own suggestions. (For reasons which may not be the same except for the conclusion there are bargains to be had in Asia, I will also move some more money there via boosting my current positions in Templeton and Fidelity global funds.) Having said that, I'd like to contest a few points in your posts.
The US's debt may be higher than the Asian nations' debts in dollar value, but as a percentage of GNP it is far from being the largest. The US's debt service ability is far from being exhausted. This will keep the dollar as the reserve of choice for the world and as Tony pointed out in his response it will give the US more flexibility. Also, how much of the total debt is owed to other nations? You can't say all of it, right? What is then the net debt after taking into consideration the debt other nations owe the US?
A few days ago in one of your posts, you kind of tallied the values of US assets. As many had done in the past, you forgot to point out the intangible costs of the democratic processes. How does one place a dollar value on the system which helps a group of more than 200 million people living under the rule of the law? You also said that the US has the highest level of subtle corruptions, but you forgot to point out that the US spends extensive resources to fight corruptions on an ongoing basis. This is one of the few countries if not the only one where even the highest-level politicians are subjected to suspicions and investigations of corruption. How much does it cost to evolve such a system? Let's say somehow a value can be assayed. Can any other country rich enough to pay such a lump sum to buy a system like that over night? From this perspective, I think the US and its markets will be revalued at much higher level vis a vis Asian markets. This subtle revaluation may be enough to counter some of the effects of a higher valued dollar. I also disagree with your blanket statement that the US markets are overvalued. Some companies may see their profits decline, but I think it will be a case-by-case basis. We shall see how 1998 will pan out in another 12 months.
-Al |
