Re: Trade Deficit, Currencies, Liquidity
Thread,
Just thought I would post some clips from recent articles that I believe are of interest to those on this thread. There are just so many ways to look at the same situation. Hard to figure where we are heading. Seems like we are on a precarious perch, but it's difficult for the bears to figure out when we will be knocked off. In the meantime our stock and bond markets keep climbing. I don't have much of an opinion, but just think viewing events from both sides is best. My quick comments are below each clip.
MikeM(From Florida)
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"CBS Marketwatch -- The strong U.S. economy is attracting more goods from around the world, but it isn't pushing domestic prices higher... The Commerce Department said the trade deficit ballooned to a record $17 billion in January as imports rose 2 percent to $93.8 billion while exports fell 1.4 percent to $76.8 billion..... Strong U.S. demand and worldwide disinflation and weak currencies are bringing ever higher levels of imports. In January, the biggest gains came from capital goods, especially computers."
Notice the weak currencies and computers statement. With a strong US$, we can afford to keep importing as long as foreign countries are willing to buy our debt. After reading Cisco's release the computer exports are not that surprising.
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"Bill Fleckenstein -- Trade deficit telling... The most important piece of overnight news that I saw was the trade deficit, which was a world record, around $17 billion. When one examines the innards, it is even more depressing. Imports were up and exports were down, which corroborate the fact that consumers here are still buying - thanks to the stock market - and that world economies are still shrinking because of the global recession... So we continue to have this completely epic trade deficit that, of course, makes no difference to anyone because it's just a fundamental. And it certainly hasn't hurt the currency that much because we have so many other crummy currencies out there at the moment."
Again, the crummy currencies reference is important, though sarcastic. Without those crummy currencies, prices wouldn't be so cheap and the US$ so strong (hence low interest rates).
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"Cousin Bob -- Imports are up again. For the fourth straight month, the trade deficit has grown larger. A good sign? I don't think so. People in the U.S. continue consuming at a furious pace, yet global problems can't seem to remedy themselves. Naturally, with all the currency debacles negatively impacting these same countries, our exports were down. I have said it before: The U.S. has become the consumer of last resort."
Again the currency reference which is important to sustain the US spending spree.
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"From AMG -- Equity flows total $2.5 Billion for the week ended 3/17/99, with most going to Large Cap Growth Funds"
The spending is strong because of increase in stock price give consumers more confidence.
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"From Trim Tabs -- Record $15 billion liquidty as market makes new high big inflows, huge cash takeovers and many stock buybacks key."
And the party continues. Market goes up, consumers spend. |
