Smashing numbers together and saying they're different "this time" won't work.
1) The stock market is overvalued no matter how you look at it...
2) We owe a %*#!load of money to Japan with our bonds. Remember a few months back when a Japanese official mentioned Japan might need to sell bonds??? That is a serious threat.
economeister.com
3) Commodity prices are commodity prices and they can change in a heartbeat. The price of oil fell something like $10 within seconds of the U.S. attacking IRAQ. The reverse can happen SOOOO quickly and all those fancy numbers get throw to hell. Not many are happy with low prices right now. The only ones are consumers :-)
If Japan sells U.S. bonds, the yield will be forced up and stocks will go down. One of the main reasons we have enjoyed the market we have, is based on our yield going from 10%+ in the late 80's to the present. During that whole time, Japan has been pumping money our way and we have been selling ourself. The time will come to pay the piper, who knows when??
Barron's March 18, 1996
PUMPED UP
Foreign central banks' buying of Treasuries helps keep U.S. economy, stocks aloft.
..Central bank buying of U.S. Teasuries has had a 97% correlation with the U.S. stock market, as measured by the S&P (see chart 1978-1996 - if you did you'd freak).
..How long the free ride lasts may well determine how long the bull markets in U.S. bonds and stocks run.
..Without the foreign central bank purchases of Treasuries, the U.S. would face a currency crisis not unlike what Mexaco went though a little over a year ago. The dollar would be substantially weaker and inflation substantially higher, leading to vastly higher U.S. rates and, most likely, a recession. How long will this largess continue? Clearly, it's in the interest of the Bank of Japan and other central banks to prevent a cataclysm.
If foreign central banks ever stop acting as lender of last resort for the U.S. bull market, the custody account might flash the earliest warnings (this can be found in the Federal Reserve Data Bank in Barron's)
I don't have the latest figures right now but Foreign Treasury ownership is around $1 TRILLION. We pay over $250 BILLION in interest to finance our debt.
Japan is the #1 owner of U.S. Treasuries. We've got each other by the balls.
And now with the yen getting weaker and the dollar stronger...
pathfinder.com
Japan may come to the conclusion that some money needs to return home regardless of the interest spread. That is why Clinton called a special meeting.
I don't think the world's going to end. I'm just familiar with how things can change VERY QUICKLY.
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