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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 (1486)	3/22/1999 9:45:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Porc, That was a great post. I have just 2 insights to add that may help. >>In accountancy terms, Smith argued that high return on assets and high profit margins derived from local competitive advantage meant greater wealth than mere asset size.<< I agree with this. But I have an intuitive insight on how this will resolve itself over the long term. If the return on capital in one nation is higher than in others, the demand for the currency of that nation will rise. (money flowing to the highest returns) The effect of a higher currency is that market share may be lost and returns on capital will fall. >>Is there too much U.S. demand for foreign goods (U.S. trade in services are in surplus), or is there too much foreign demand for U.S. dollars? << That's an excellent question also. I have been asked that question by other investors when I've talked about the dollar. It's my "guess" that it's a demand for foreign goods phenomenon (mostly). There is at least some evidence that credit expansion is very rapid in the U.S., and the trade deficit has persisted for 15 years despite a generally weak dollar until the last 2-3 years. One more note. There is data on the amount of treasuries in foreign hands. That number had been growing extremely rapidly until recent months. Even "AL" says that this is not sustainable. But who know how long it can last. Wayne