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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (138)	4/5/1998 3:04:00 AM
From: Berney	Respond to of 1722

On Moneyline the other night, Lou mentioned that Japan has reduced its Treasury position by $24B or about 8% over the last six months. They are now in 2nd place behind UK. They have about $293B of our debt and UK about $300B. Considering the massive size of our debt it seems inconsequential to me. Berney

To: porcupine --''''> who wrote (138)	4/5/1998 1:14:00 PM
From: Freedom Fighter	Respond to of 1722

On Japan, >The Japanese bought them to do something with excess dollars in >the first place -- since they won't consume our products and their >selling dollars would result in our being unable to buy their goods. >If >the Fed buys its debt instruments back from the Japanese, what do the >Japanese then do with the dollars -- put them under the mattress? I am not sure what the Japanese are going to do but they could theoretically dump them and crush the dollar. THat is the whole point of the issue. If the rate of accumulation of overseas debt proceeds at a rate that is faster than our ability to pay the interest, we are eventually toast. Compound interest payments will take care of that...NO DOUBT! None! ZERO!. It is a matter of how distant into the future. In the mean time, this accumulation is allowing large imbalances to proceed with the appearance of health. It is presently proceeding at much faster than our own rate of growth. We are on the slow path to Hell! >If the Fed doesn't buy debt from the Market, won't short term rates >go up -- meaning that the Fed has in effect raised rates? How can >they raise rates in this climate? Yes of course. That is the problem. If they don't monetize them rates go higher, dollar sinks, inflation goes up etc... If they do buy them, money supply roars and eventually the same outcome occurs. That is why this is an artificial situation. It can't proceed forever but is producing favorable results for as long as the game can be played without reaching critical mass. >I will concede that if the Fed is pouring funds into the system >to hold down short term rates, this would have an inflationary effect >on securities prices. But, from that he leaps to the conclusion that >economic catastrophe is just around the corner. I have been hearing >this >since my childhood in the 1950's. Please forgive me for becoming >increasingly skeptical of doomsday scenarios. I know of noone who is saying that a bust is imminent unless they have reason to believe we have reached critical mass. Noone who ever lived or will ever live (IMHO) can know these things. It is enough to know that security prices are benefitting from an unsustainable flood of central bank money. Also, pointing to crackpots who were wrong in the past about issues that we are not discussing today has nothing to so what is irrefutably happening now. >At this point, this seems like a highly speculative conclusion based >upon the oldest of all technical indicators, i.e., what goes up must >come down, and what goes up sharply must likewise come down sharply. It is an argument that says that markets are efficient over time. If stocks are trading at twice their long term average and 30%-40% higher than ever in history it really doesn't matter if they come down in a year, 5 years or 10 years. The point is that it is lunacy and sheer greater fool theory to be buying most of them at these prices. (there may be some unique exceptions) A "VALUE" case can be made for higher than average prices. No VALUE CASE WHATSOEVER can be made for 30%-40% higher than the all time high. Not even close. It is carved in stone that "REAL" returns from stocks over the long term from here will be very substantially below the long term record.