LT:
Excellent note.
I'm likely going to be absent for a bit, but saw your comment and couldn't resist a quick add-on.
As you suggest, the bond vigilantes are pointing the way
The U.S. dollar is already under huge pressure as other jurisdictions realize that they now have TWO alternatives (Euro now, and later, gold). They are selling quietly now, but that too will soon become more than noticeable.
Big Al has very little ammo left. Any more rate cuts and the dollar doesn't fall, it plummets. Jawboning only now.
Japanese savers indeed got massacred last summer,...bought the peak of the market and the peak of the Yen/dollar. I was worried that the Japanese trust companies (which became free to roam the world as of Dec. 1, 1998), might flush another river of money into our markets, but the dough is needed for those mountains of Japanese govt. bonds that are being printed up, and the trust managers saw the blood-letting of last summer. They are staying home. Japan is in a depression anyway.
Keep China in mind. They are the second largest holder of U.S. treasuries and they have already pulled Greenspan's leash a few times. They announced a 30% conversion of reserves to Euros a while back. They also have terrible internal problems of their own. Family first, neighbours next, distant acquaintances last.
No matter how one cuts it, this market is now doomed. The crunch can be delayed a bit, but that is all. It cannot be avoided. Latin America is in full-blown implosion now, and I suspect that it will be the last straw for many U.S. banks. Greenspan is pouring an historic river of liquidity into the system, but "pushing on a string" only works for so long.
Earnings just keep on falling, corporations just keep on adding to their debt loads (primarily to buy back stock,...suicidal in this environment), and as long as the market stays up, consumers just keep plunging ever deeper into debt buying all those new Cherokees. Meantime, the high-pay jobs disappear.
None of this bothers the "E-traders" as it doesn't show up on their Omega charts. The dip-buyers can't or don't read, they just respond in Pavlovian fashion to those wondrous "buying opportunities". Financial advisers have got their clients chanting "I'm in it for the long haul" 12 times per day (and they will sell out at the bottom as they always do).
Now if only we could call the timing. (g)
Best, Earlie |
