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Strategies & Market Trends : The Millennium Crash

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To: bobby beara who wrote (3370)	8/31/1998 10:26:00 PM
From: tekgk	Read Replies (1) of 5676

>> American's have a dismal savings rate. Yep, 0.6% last quarter an annualized basis. That's why I laugh when they ask the man on the street if he/she will sell their 100 shares. Who cares, it's the trillions in foreign investment here (at least 1.2 over the last 4 years), the trillions (1.2-1.5) in Euro dollar deposits, the trillions (at least 2) in yen/dollar carry trades, hundreds of billions in gold carry trades( 8,500 tons), the trillions in bad debt in Asia (1.5-2.5), and the trillions in bad derivative instruments (unknown). Total derivative instruments hit 96 trillion worldwide last year. I believe that the people that created these hedges failed to take the default of the person on the other side of the bet into the fancy mathematical models. The demise of various hedge funds in Eastern Europe is a sign that all is not well in the derivatives game. None of this is a predictor of debacle; it's that watching a few billion in domestic savings is not as important as the trillions in other volatile areas like the ones mentioned above. The one that I worry about the most at the moment is Euro dollars. By law Europe will trade in Euros and most of the oil producers and Asian countries have agreed to accept Euros already. This means that by law, banks and companies in Europe must trade in Euros and they no longer have a need to hold dollars for trade in Europe or with most of the rest of the world. What happens if they dump the excess trillion or so in dollar holdings? Does it start the whole ball rolling? Today could very well turn out to be a correction in a bull market or the start of a bear market - I don't know. I do know that if the dollar gets hammered late this year or early next year it's the start of a decades long debacle for Americans.

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