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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Mephisto who wrote (21614)	7/14/1998 9:16:00 PM
From: robnhood	Read Replies (1) \| Respond to of 94695

Mephisto and all,, This could be the reason for the strength,, << U.S. Economic Strength Continues Unabated This ongoing geopolitical process is taking place against the backdrop of unparalleled American prosperity. The United States is, without a doubt, in an economic golden age. Given where the international system was ten years ago, it is odd to say that American economic power is today greater than its political power. Nevertheless, it is true. The most dramatic feature of the international system is the robustness of the American economy. We do not expect the American economy to weaken materially. American exports represented only about 8.5 percent of Gross Domestic Product in 1997. Total exports to Asia represented about a quarter of this total. If the U.S. lost twenty percent of its exports to Asia, this would represent a loss of less than one-half of one percent. Assuming a multiplier effect of decreased sales to Europe due to the Asian decline, it is still hard to believe that a complete disaster in Asia would slice more than one percent off of America's GDP. Since the economy is growing faster than this, the worst case scenario would be that Asia will cause a slow- down in the American market. In an odd way, the lack of Asian leverage on the United States is due to its own policy of aggressive exports and protection against imports. These policies mean that the U.S. is not very vulnerable to Asia's problems and not likely to do much to solve them. Even the worst case scenario is counterbalanced by a benefit to the United States from Asian troubles -- capital flows. As Asia has melted down, money has fled Asia. This includes not only Asian money, but U.S. and European money being held back or pulled out. This money has tended to gravitate toward safety, which is represented by the American capital markets. This process is not over by any means. The tendency of the conventional wisdom to underestimate Asian problems has meant that many investors have tried to hold tight to their positions. Successive crises have shaken loose more and more of this money, but there is plenty left and it is flowing toward the U.S.. This makes up for lost trade in very positive ways. Fleeing Asian money has facilitated new capital formation. This means that while labor shortages are a real problem, interest rates are extraordinarily low for this stage of a business cycle, and the Federal Reserve Bank has had no problem maintaining a positive net reserve situation. We see no reason to expect the U.S. economic expansion to end in the next quarter or even this year. Thus, our prediction in our 1998 Annual Forecast stays in place: "The United States has become the safe haven for investments as well as the lender of last resort on a global basis. As Asian economies weaken, the flow of money into the United States increases... This flight to safety will serve to cushion weaknesses in the American markets and limit the negative phase of the U.S. business cycle." It has worked thus far and will continue to work. >> the rest is here..... Message 5184773 russell