Hi,
It's good to see you drop by once in a while. Like you I haven't had time to post any meaningful messages. My plan to create several technology companies to take advantage of the current mania is working, but it seems to be taking up almost every minute of the day. I hope that all is well with you.
>> 4 weeks
Actually, I think that it will take until November or so for a real bear market to set in. Last summer I tied the end of the bull market in stocks to the end of the dollar bull market. My feeling, as I recall, was that private foreign investment in the US would end about 9 months after foreign central bank investment in bonds had topped. This put the end of the dollar bull in the Mar/Apr. 98 timeframe. I had not foreseen the depth and extent of the Asia crisis and the domino effect into all of the rest of the world with the exception of Western Europe. My assertion that foreign investment was at least twice as big as domestic savings was also wrong. In fact, domestic savings is approaching zero and net foreign investment is just about four hundred billion on an annual basis at the moment. The 401K money that the popular media likes to sing about is just noise and the new era song seems to have finally faded. Most of the mystical explanations for the meteoric stock market rise, (like we are so smart and transparent) can be easily explained away by the massive influx of foreign money.
When will it end and why? More than halves of the world's economies are now entering into recession and a few are even falling into a serious depression. Even the first of the G7 countries is beginning to falter (Canada). As a result, money continues to flow into the US. This will continue and even escalate as South America crumbles country by country. Columbia is now turning back into a war zone, Peru and Ecuador seem to be engaged in some sort of a border war, and the rest of the SA economies are beginning to falter. (Brazil and Mexico had a bad hair day today). As they crumble, the money will rush into the US.
The game will end when the Euro begins to emerge. There are over 1.2 Trillion US dollars (Euro-dollars) in Europe that is being used for inter-European trade and international trade. Once the Euro is in place, the need to hold dollars will evaporate and they will be sold for Euros. This is not a prediction of the long-term success of the Euro, only recognition of the fact that by law, trade will be in the Euro in Europe. Several large outside countries have already agreed to trade in Euros. Some notable examples are China and Saudi Arabia.
My view is that this 1.2 Trillion-dollar movement from Euro-dollars to Euros will cause some of the 1.5 Trillion Dollars that have recently entered in to the US as a result of the Asia debacle to get worried and start to exit. After all, these recent investors have shown that they have no sense of loyalty, even to their own countries. Once this 2.5 to 3 Trillion-dollar train start to move nothing that I know of can stop it. |
