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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (22891)	8/20/2002 5:20:24 AM
From: EL KABONG!!!	Respond to of 74559

Hi Jay, 'We must also be concerned about hot money leaving, as they must at some time, and gad, the cold money may leave as fast, now that folks do not feel safe' As I see it, in bull markets and in "normal" markets, hot money will seek out the highest return at the lowest levels of risk possible. Simply put, high returns on "safe" investments predominates. However, in bear markets, hot money will flee to perceived havens of safety. That is why bonds usually outperform stocks during bear markets. However, in this secular bear market, the primary risk of bonds (default) is now roughly equal to the risk of equities (loss of capital or devaluation of returns), so no "safe" haven is easily found. Ignoring real estate (deflation risks, default risks, liquidity risks), precious metals, etcetera, that leaves hot money only one option, which is to abandon any hope of positive returns, and instead pursue a strategy that minimizes any losses (which are perceived to be unavoidable). With such a strategy in place, where does hot money go? Likely it would be into cash, or near cash vehicles, in a country perceived to have a rather solid fiat currency, regardless of how the currency fares in world markets. Just a guess on my part, but I'd say most people would rather be holding US$s or Canadian $s or Euros as opposed to say Argentina's currency or just pick some other country where the currency is routinely under intense pressures. Where will the buying power come from? Ultimately, from a new generation of investors, anxious to save for their future needs, and yet balance their future needs with their current needs as consumers. What is the GAAP to GAAP comparison of honest earnings vs valuation between the largest and second largest economy Darned if I know... What is the second largest economy, and how does one measure what is largest, second largest, etcetera? Are we talking about GDP or spending or debt or the "intrinsic book value" of a nation? KJC