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To: Tom D who wrote (72266)	8/5/1999 11:55:00 PM
From: GST	Read Replies (1) \| Respond to of 164684

Tom -- I get personal briefings, but mostly I just follow currency movements. There are reports of flows of funds -- but they are never current. For example, the US government reported that last year $300 billion in portfolio investment flowed into the US -- 2/3 of that is from Europe BTW. There are no current #s that I know of -- but the heavy betting is that well over net $100 billion will leave the US market by year end at current rates -- from net positive $300 billion to net negative $100 billion is a shift that dwarfs inflows from 401ks and all other sources in the US -- and with that I have not made any allowance for the amplifying impact of the leverage put on these flows -- money borrowed to amp up these investments. To get a rough feel for the extent of these flows consider the following: Since the last time I was there for a briefing -- June 9th -- the Japanese government pumped something like $30 billion into a series of interventions aimed at holding the yen above 120 -- the yen is now below 115. That means that substantially more than $30 billion on a net basis flowed the other way -- not all portfolio investment, but a big number. A good estimate is 50 to 100 billion. Flows back to Europe are more recent than that -- dating to some time in July. Without intervention, the yen would likely be closer to 100 than to 114. In effect, the Japanese government is inadvertently subsidizing speculators against their own currency - perhaps that is why they gave up for now. Think of it this way -- they keep the yen cheap so that buyers of yen get more yen for their dollar but fail to prevent the slide of their currency -- allowing more dollar selling to occur than would be the case if they did nothing. In the end, intervention will fail -- and its failure is a clear indication of the outsized scale of the capital flows -- creating a current that not even the combined power of the central banks of the US and Japan can swim against. At any rate -- whether or not they admit it -- there is a policy shift going on in the United States to accept a weaker dollar to close the increasingly dangerous trade gap. If the yen weakened back above 117 without any intervention then we could get a reversal -- assuming that the euro weakened to the same extent -- remember Europe is equally important here.