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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Bearded One who wrote (8092)	12/10/1997 2:37:00 PM
From: Bill Wexler	Read Replies (1) \| Respond to of 9285

Deflation....inflation....who cares? Stocks can only go higher! Wheeeeeeeeeeeee!!!

To: Bearded One who wrote (8092)	12/10/1997 2:56:00 PM
From: GuitarMan	Read Replies (2) \| Respond to of 9285

WASHINGTON -- Japanese investors have already started unloading their vast horde of U.S. Treasuries, the U.S. government said Wednesday. The Commerce Department said the Japanese had "sharply reduced" their purchases of U.S. bonds, notes and bills and had become net sellers of Treasuries during the third quarter, which ended in September. The worst of the Asian panic came in October with the Hong Kong market crash and the subsequent global reverberation. "They are throwing in the towel," said Thomas F. Carpenter, chief economist at ASB Capital Management in Washington. "They are throwing in the towel." Thomas Carpenter ASB Capital Management The sell-off by the Japanese from July through September was offset by record purchases of Treasuries by Western Europeans, the Commerce Department said in its quarterly report on the U.S. current account. Overall, foreigners bought $36.9 billion in government paper in the quarter, down from $45.1 billion in the prior three months. Larger deficit Overall, the current account deficit rose 11 percent to $42.2 billion on a $4 billion larger deficit in merchandise trade. Investment flows in and out of the United States nearly balanced out during the quarter. Americans bought $38 billion of foreign stocks and bonds in the quarter. Foreigners bought a record $60.8 billion in U.S. stocks and corporate bonds in the quarter, as the flight to quality intensified. Foreign central banks from "a few non-OPEC developing countries" increased their holdings in the United States by $22.5 billion in the quarter. Foreigners have nearly doubled their stake in U.S. bonds in just three years. They owned just under 38 percent of all outstanding U.S. government securities on Aug. 31, according to the Treasury Department. Of the $1.278 trillion owned by foreigners, Japanese accounted for $321.2 billion, about 9.5 percent of outstanding U.S. paper. Rumors of a plans for a big selloff of Treasuries by the Japanese government shook the bond market earlier this year. More recently, the market has shaken off hints by the ruling Liberal Democratic Party and the government that some sales of U.S. Treasuries by the Bank of Japan would be necessary to bring capital home to restructure the financial sector. "The question is whether the selling out of Japan would accelerate," said Russ Sheldon, chief economist at MCM MoneyWatch. Dollar vs. yen Sales in the third quarter were likely coming from the private sector, not from the central bank, Carpenter said. Japanese banks and insurance companies had flocked to U.S. bonds for a number of reasons that boil down to "profit." The huge 4.5 percentage point spread between U.S. and Japanese government bonds is unbearably attractive, especially given the relative strength of the U.S. dollar versus the yen. But now the Japanese financial institutions are facing the realization, brought home by the crisis swirling around East Asia, that bad loans cannot be hidden forever. Selling their beloved T-bonds isn't easy, but it's the only way to raise the hard cash needed to pay off the debts, Carpenter said. Carpenter expected the Japanese institutions to continue moderate selling of T-bonds through the first quarter. Luckily for the U.S. economy, the selloff is coming just as the supply of bonds is dropping. If the U.S. government were still running deficits of $300 billion, who knows who would buy all that paper.

To: Bearded One who wrote (8092)	12/10/1997 7:10:00 PM
From: hasbeen101	Read Replies (1) \| Respond to of 9285

Inflation does not cancel out Deflation!! I agree that the price of services (and labor) is growing higher than the price of goods. But firstly lots of tech stocks sell plenty of services, and secondly markets like software are as far away from commodity markets as you can get. Let's be clear on this: if we're simulataneously fearful of inflation and deflation, doesn't it just mean that prices are rising faster in some areas of the economy than others? This is not the bone-crunching OPEC oil crisis of the seventies, nor the policy-induced economic contraction of the thirties. I am not strongly bullish on US equities in general, but on the other hand I'm not bearish either. There is moderate overvaluation but wonderful fundamentals. I think shorting can be targeted at overvalued stocks, but I wouldn't expect much help from the overall market. I just find it very hard to grasp when this thread seems frantic about inflation and deflation at the same time. It just seems like a very weak argument to me.