2 replies to this topic

[ogm]

Our money has become even more worthless. And on the day the US corporations will decide to report in Japaneese yen, the profits will skyrocket by 1200% Sounds nice, doesn't it ?

[ogm]

Somewhat related artcile.

I do stress the point though. Foreigners traditionaly buy the tops.

http://usmarket.seek...m/article/41516

Global Investing In America – Why Now, Of All Times?

Posted on Jul 19th, 2007

FP Trading DeskFP Trading Desk submits: The U.S. economy is so bad it is starting to look good. That, at least, is the assessment of global investors who are scooping up record amounts of U.S. stocks and corporate bonds. Are they on to something?

According to the U.S. Treasury Department, foreigners bought a net total of US$163.5-billion worth of U.S. securities in May, nearly 70% higher than net purchases in both April and March. Stocks and corporate bonds showed the biggest increases, with equity buying reaching a record high that surpassed even the heyday of the 1999 technology boom.

This enthusiasm for U.S. assets coincides with the Dow Jones industrial average cracking the 14,000-point barrier Tuesday -- a record high -- just three months after it breached 13,000 for the first time. The blue-chip index retreated slightly near the end of the day, closing at 13,971.6. The broader S&P 500 is just below its recent record close and the tech-heavy Nasdaq composite index hit a fresh six-and-a-half-year high Tuesday.

The love of all things U.S. might come as a surprise when you consider the fragile state of the U.S. economy. The housing sector is crumbling and few observers are confident it has hit bottom yet, given the potential for a spillover effect from the imploding subprime-mortgage market. As well, long-term bond yields have been above 5% for over a month, leading to concerns that higher borrowing costs will act as a drag on corporate and consumer spending.
money
The U.S. dollar has been in a virtual free fall against the euro and the Canadian dollar for some time. And economic growth slipped to an alarming 0.7% in the first quarter at an annualized rate, putting the U.S. economy at the bottom of the pack among the world's major economies, including Japan, and close to a recession.

Add it up and the United States looks troubled -- so why is the world beating a path to its stocks and bonds?

Part of the answer is that foreign investors in places such as Canada, Europe, Asia and oil-producing countries in the Middle East are recognizing that their currencies go a long way in the United States these days. Geographical diversification is now cheap and easy.

The push to go abroad is being met by an equally strong pull toward the United States in particular, where investors are betting that most of the bad economic news has been built in to financial markets. Many observers believe the U.S. Federal Reserve will maintain short-term interest rates at 5.25%, which can be good news for bond investors and a confidence-booster that corporate profits will remain healthy.

At the same time, the United States is home to the greatest collection of global corporations on the planet -- behemoths such as Microsoft Corp. (MSFT), General Electric Co. (GE) and Pfizer Inc. (PFE) that derive a substantial portion of their sales from overseas, where the global economy is strong. These sales are now worth more when converted into U.S. dollars, and the low value of the greenback only makes these companies more competitive next to their international rivals.

Despite the recent attention, U.S. equities remain at reasonable levels. Both the Dow and the S&P 500 trade at just over 18 times earnings, well below the bubble days of the late 1990s and not much higher than their long-term averages.

For sure, volatility is on the rise as major indexes move deeper into record territory. But setbacks are ideal times to buy more U.S. stocks and bonds.

Edited by ogm, 19 July 2007 - 08:22 AM.

[*JB*]

Am I the only one who sees the dollar slide as the result of (at least in part) a stealth weak dollar policy. MUCH of the benifits like balance of payments, including our exports growing -- along with increased foreign investment with their costs being much lower in $dollar terms -- have made a lot of economic hand wringing go away. I personally LOVE a strong dollar, but "me thinks" this is economic warfare with the rest of the world and a weak dollar is a strong weapon....if used for a while!!! The negatives of a weak dollar can start to hurt IF it lasts too long...or declines TOO rapidly (not something I think has occured). I guess I'll travel where the dollar won't hurt, like here in the US and leave the European travel alone for a good while.