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

To: MikeM54321 who wrote (5221)	7/20/1998 9:03:00 PM
From: Stitch	Read Replies (1) \| Respond to of 9980

Mike, <<Now my questions are, "Is all of the above going to result in problems to the US economy?" >> Here is a link originally posted by John Hunt on the Mohan thread. (What a great news hound he is). nypostonline.com It points to exactly what your are questioning. Here is a cut from the linked article that I would be especially concerned about. According to Challenger, Gray & Christmas, an outplacement agency, companies announced 54,914 job cuts in June. That was a 99 percent increase over May's number and 264 percent more than June 1997. I think there is still some room for a continuation of the bull for a while as labor statistics (as outlined in the article) are not especially accurate and lag considerably. But I believe these figures will catch up with us. I have long said that employment levels will have to be watched closely. I think a watch on mutual fund capital flow and figures on 401Ks (available?) is prudent. I believe also that there will be a tailing off of off-shore capital in-flow as Asians must "shore up" to garner strength (cash) at home to survive what is surely a worsening situation. I look for some diminishing of our sanctified liquidity if all this pans out. If it is a significant tailing off then you know what happens. I am also eager to hear Zeev's comments, and anyone elses as well. Best, Stitch

To: MikeM54321 who wrote (5221)	7/21/1998 11:32:00 AM
From: Robert Douglas	Read Replies (2) \| Respond to of 9980

Mike, if I may join the discussion, let me make a few comments on how I think the situation will impact the US. Hopefully, I won't break the string of intelligent comments. At the present time, the large trade deficit is a god-send. Without this pressure valve releasing steam, the American economy would have overheated and the Federal Reserve would have already hiked rates. The circle of investment inflows driving up US assets and the dollar -thereby attracting more inflows and bidding them up even more is presently benevolent. It keeps inflation low and benefits the American consumer. The deficit, the investment flows, the rise in America's currency and its' markets are all connected. As you point out an imbalance such as this one cannot continue forever, and this imbalance is certainly reaching large enough proportions to warrant attention if not deep concern. Ideally, as the US economy slowed our interest rates would be cut. This would lessen demand for the currency and bring down its' level. This would help US companies compete and the trade deficit would shrink. Unfortunately, at the present time, the United States is the main demand engine for the world. Now is not the time to pull the demand rug out from under the world economy. We need increased demand from, Europe, Japan and Asia before the US can safely start to unwind its' massive trade imbalance. How will this impact the financial markets? This should be interesting. Perhaps, if it happens at the right time, it will be orderly and uneventful. If a decline in the US dollar prompts a massive reduction in investment and a sharp drop in US markets, then this benevolent circle could easily turn malevolent. Robert

To: MikeM54321 who wrote (5221)	7/21/1998 4:09:00 PM
From: Zeev Hed	Read Replies (5) \| Respond to of 9980

Mike, I have two comments, the first has to do with Poole's point of view that inflation will rear its ugly head because of the rapid increase in Money supply. While not as learned as Mr. Poole by a mile or two or a thousand, I disagree with him completely. He is looking at the raw numbers and do not take into account the change in money velocity, which during the last 12 months has slowed drastically. A lot of what we print (in terms of greenbacks) is simply taken out of circulation (and completely out of the US economy) by the mattress filling citizenry in the Rim and Russia. There are no accurate numbers describing this phenomenon, but my "proof" while indirect, is, IMHO, flawless, the proof is in the CRB index which today broke through an extremely strong support level of 208, announcing to whomever is willing to listen that inflation for the foreseeable future is dead. Another way to look at it, the greenbacks in circulation support not only our economy but an increasing portion of the world's economy, and that portion is increasing even more rapidly than the rate of increase in our money supply, thus effectively, there is too little money chasing too many goods, and thus we have disinflationary pressures (as the CRB indicates unequivocally). By the way, apparently some people in some governments must be reading this thread of ours. Japan has just started an advertising campaign promoting consumption in Japan (my suggestion to mount an advertising campaign "the patriotic thing to do is go out and buy something"). As for the current "account deficit" and "trade deficit", I am not sure if the quarterly figure of $47 Billion you cited is the one or the other, our current rate of trade deficit is close to (but not there yet) to $45 billion per quarter, not a pretty picture, but a necessary one, if we are to help the rim to regain balance, but if Japan does not succeed in its consumption promotional effort, the situation will grow worse, and our ability to continue will be impacted. Because we are so close to the number ($51-55 Billion in trade deficit per quarter)where weakness in our dollar sould stem the flow of imports, I do not think that the yen has much more weakness than my target of 156 yen/dollar in it (some "learned people are claiming that the yen will go to 276 yen/dollar, and i wonder what potion they are on). This leaves my general scenario for the rest of the year intact, topping in August followed by a "wobbly" period of a month to six weeks, and then a nasty decline in or about October. Zeev