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

To: see clearly now who wrote (8510)	4/21/1999 11:10:00 AM
From: MikeM54321	Read Replies (1) \| Respond to of 9980

"I seem to remember that the trade figures do not include services and when they are calculated in its a different picture...is this true?" Hello Arnold, Yes your statement is accurate. The monthly trade figure, "Merchandise Trade Balance," does not include; services, investment income, and military aid. The next report which comes out quarterly, "Merchandise Trade Deficit," is just a re-hash. The quarterly, "Net Exports," figure is more important because it does include services. And the US exports considerably more services than it imports. Glad you pointed this out because I forgot about it (and so did most financial writers). But the big daddy of the reports is the quarterly, "Current Account." The most important one because it includes financial flows and determines how long we can keep going with our record breaking trade gaps. In other words, how long Japan and others will keep financing US consumer spending. At some point, a HUGE trade deficit is supposed to start to weaken the US$. Then this is supposed to trigger some withdrawal of foreign investment (US Treasuries) because no one wants to be holding a weakening currency. Then this is supposed to put upward pressure on interest rates. Then that slows down our economy. Then that pricks the equity asset bubble, etc., etc. But in our current market frenzy, most indicators that used to cause a great deal of angst, are virtually ignored. But as usual, this is just one indicator to me, that I still need to remain cautious because we are in a precarious situation. But I am also mindful that even though it's precarious, it does not mean it can't go on for a long time. The world still loves the greenback and I'm almost beginning to believe they hoard it. Especially the Asian countries in crisis. So if this continues, it doesn't appear that a large Current Account Deficit matters. When foreigners get our greenback, they don't convert it. Hence no pressure on the dollar to weaken. MikeM(From Florida) PS Thread, If I got something wrong, please feel free to step in and correct me.