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

To: Mark Nelson who wrote (867)	1/14/1998 10:19:00 PM
From: DMaA	Read Replies (3) \| Respond to of 9980

All SSI funds collected in excess of current expenses are used to purchase Federal Bonds. The proceeds from the bond purchases are put into the general fund ( and of course immediately spent ). The bonds are placed into the SSI trust fund. The true magnitude of the deficit is masked by the amount of this excess. The SSI crisis will hit not when the trust find is exhausted since the trust fund contains only promises to tax future tax payers. The crisis hits the day expenses start to exceed income and so begin to ADD to the deficit instead of offset it. This will happen pretty soon.

To: Mark Nelson who wrote (867)	1/14/1998 10:58:00 PM
From: Zeev Hed	Read Replies (4) \| Respond to of 9980

Mark, I think Abbey is basically correct. While the deficit is about $28 billion in the last year, the increase in debt is actually some $180 billions. However, this does not necessarily means that the two figures contradict each other. The debt is a "cash flow" mirror, while the deficit is a "prfit and loss" statement. We must have borrowed a bunch to lend out (IMF and the Asian crisis) and Rubin might have engaged in some "overborrowing" to exploit the current low interest rates environment. Whta is more important however, is the fact that there is shortage of US treasuries. How do I know? Well interest rates are declining, a good sign of treasuries shortage. More important, we paid out as interest last year at least $300 Billion (a would guess a little more). These $300 billion need to find a home, usually they end up as additional treasuries, but lo and behold, only $180 Billion went back in, this, IMHO created a shortage of about $120 billions, which I believe the Japanes provided in drips here and there. So, I think that Abbey is right after all. Where I disagree with her, is on the short term. Just because the fundamentals do not indicate an excessively overpriced market, it does not mean that the market will not go to undervaluation. I think that the fear of an impact on US corporations of the instability in world's financial markets will result in a short term retrenchment, particularly in the semis and other high techs. Zeev