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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Tony van Werkhooven who wrote (374)	1/3/1998 8:45:00 PM
From: Rational	Respond to of 9980

Tony: Thanks for your appreciation. I am also learning a lot from this thread from some intersting and intricate questions. << Would it not be reasonable to expect strength in the dollar as long as there is turmoil in asia? >> It is possible that US$ will not lose a lot (it will likely rise for some more time before falling), because the Fed will be forced to raise interest rate in line with a fall in bond markets. Depreciation of yen, not of SE Asian currencies, is the biggest threat to the US$ economy. I do not see a way to prevent a potential crisis in the US due to the Asian currency devaluation; that actually started with the Chinese yuan devaluation in 1994. Invesors have liked US$ dollar because the US stocks were rising; which was possible due to corporate profits. A lot of US stocks rose due to a bubble effect. When investors realized that companies like INTC and MSFT could rise ~100 times, they bid up every tech stock as they arrived in the market as IPOs. US stocks have weakened due to a softening of exports, competition, and bursting of bubbles; and investors are switching to US Treasuries, preserving the love for US$. Thus, you are right that as long as the fundamentally serious problems -- (i) trade deficit, (i) US debt, and (iii) the looming resurrection of budget deficit -- do appear as serious as they are [just like the SE Asian problem appeared to most expect to investors like Soros], investors will remain in love with the US$. But, look at moves by Soros -- this weekend he is hobnobbing with President-elect Kim DJ in Korea!!, although my views do not stem from Soros' moves. My point is that smart investors visualize the problem earlier than others and many announce their moves after they do so. Sankar