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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (7479)	12/19/2006 6:27:52 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

The 2006 Q3 Current account deficit was 6.8% of GDP, at the upper end of the 5-7 % zone that many macro types feel is the prudent area that the US should be in. But then the root causes are being looked at and we'll see how well they are addressed. Paulson and Bernake just spend two days in talks with the Chinese in Bejing seeking a more natural float of the Chinese Yuan. When you look around at the choices that the very large global asset managers have for liquidity, there really are not that many. As I've pointed out on this thead the past year the total semi-liquid USD and Euro Currency aggregates are each in the neighborhood of 5 Trillion dollars. It's extraordinarily hard to transfer the north side of a Trillion dollars of Capital Assets without greatly moving currency rates. There are not all that many options when we get to Asset Supercategories as David Darst of Morgan Stanly wrote them up in his 2003 book "The Art of Asset Allocation" You've got: Capital Assets ( equities,Fixed income Securities,Real Estate) that throw off cash flows and or have terminal value payments. Consumable or Tradable Assets: (Energy Complex, Grains and Softs, base metals, livestock etc.) where values are determined largely by supply and demand. and... Store of Value Assets: (Art and Antiques, Currencies, Jewelry, Precious Metals) where valuations are determined primarily by investor psychology and preferences. Some assets overlap asset supercategories and Markets may also misclassify assets especially during periods of transition between Inflation and Deflation. Currently the Deficit is not even growing as fast as the total wealth creation in the U.S. There is also the issue of Intellectual Property, Thought Leadership and Market Efficiency that is very hard to appropriately value. In the next post Dennis Gartman will outline a few of his thoughts on the trade deficit from his recent opinion piece. John