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Strategies & Market Trends : Waiting for the big Kahuna

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To: Berney who wrote (21056)	6/28/1998 1:23:00 PM
From: Bonnie Bear	Read Replies (2) of 94695

Berney: an interesting take on this is the source of the money. On Dr. Ed's stock market chart page there's some charts of central bank holdings and mutual fund flows. He shows that the money flow since 1994 (actually a lot longer) is dominated by foreign money flows, and that U.S. participation has dropped significantly since last October. The stats on the baby boomers is grim- they don't have any savings or investment. They probably only help the stock market by that 15% they pay on their credit-card debt. So the bubble is being inflated from foreign money. This must pose an interesting dilemma to Greenspan, who is dealing with a multinational stock market but only has responsibility for U.S. economics. There is no law against large multinationals printing huge amounts of money overseas and buying stock, or creating derivatives, it's out of the jurisdiction of U.S. laws. The chart shows the largest divergence between U.S. and foreign participation in 87 and 94. Foreign money was the last to get out. Another interesting chart is the volume of debt held by foreigners- it had a sharp reversal (hard to read chart, but it looks like last october again) and is headed down sharply. I thought the reason the banks were buying the brokerages was so they could cover their derivatives losses with the super-fast computer trading schemes of the brokerages, the game was to buy the brokerages with the fastest computers. I'm still hanging onto BSC as I expect them to be bought for a nice price. Pension plans buy the nifty fifty for one objective: they will buy companies that have sufficient cash flow to offer dividends in an economic downturn. So they don't care if the stock is a wasting asset as long as the future dividend flow is sufficient to serve the future cash flow needs of the pensions. The baby boomer pension will need periodic payments but will not necessarily need a lump-sum return of principal. So I'd venture to guess that deals have been cut with the nifty fifty and the pensions, the index may drop drastically but the dividends will increase. Sorry, but I'm not interested in following the big boys because the end objectives are different than mine. I do note that the U.S.-based pensions are moving to REITs in a big way, I'm willing to follow that one. At some point the composition of the S&P will be altered to reflect the change in focus.

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