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The Great Foreign Financing Misconception



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While it is true that the US savings rate is negative, it is at least
partially because money invested in the equity market is not counted in
savings. Most 401Ks are near 100% in stocks. The great risk to the US
stock market is not the Japanese or Europeans pulling their money out of
the US, it is Americans returning to normal weightings for other asset
classes.

This story of foreigners supporting our markets is the same B.S. we see
all the time regarding them financing our government budget deficit. The
U.S. budget deficit is large, BUT, Japan's is larger and so is Europe's
as a percent of GDP. The U.S. is not the problem in the global financial
system. It is Japan and Europe!

As for Greenspan and the Fed, they did the only thing that made sense
(given the way this Fed operates anyway). They were not likely to
increase rates without hinting at it first. But, they see trouble and
are suggesting that further rate hikes are likely. They thought that
they could mollify the markets by saying they were not necessarily going
to increase rates quickly, but instead, the market sees this as more
angst until next year and then they are concerned that the Fed will
raise rates as the economy slows in 2000.

Bottom line: If there is a stock market bubble, it still will not be
burst, but 1190/1100 cash S&P 500 is possible in the next month or so.
Bond futures should at least reach 111 handles with 109-07 preferred.
The dollar, as long as it holds ¥106/105 range still has potential to
rally toward mid-111s, but remains weakish in look versus Euro s-t. Buck
should eventually tumble toward ¥100 too, but by late Q4, the dollar
will again reign supreme against all comers.

--
Steven W. Poser, President
Poser Global Market Strategies Inc.

url: http://www.poserglobal.com
email: swp@xxxxxxxxxxxxxxx

Tel: 201-995-0845
Fax: 201-995-0846