Say Anything Blog

NASDAQ in 2000 4696.69
S&P in 2000 1527.46
What is it today?
American investors?
Who is buying our CDOs and MBSs? Americans?
LBOs usually push high grade corporate bonds into junk due to the heavy debt load. Watch Sallie.
Low fed rates, not Bush tax cuts pumped up the economy.

“We have a dollar that’s adjusting and I am for a strong dollar.....
Our dollar doesn’t buy as many barrels of oil as it used to and so therefore it’s more expensive for the American people”..... Bush 3/12/08

NASDAQ in 2000 4696.69
S&P in 2000 1527.46

Are you serious?

Did you forget about 9-11 and a GLOBAL RECESSION?  Oh yeah, and the Internet collapse?  Investors put way too much money into NASDAQ companies that offered little or no return of investment, let alone return on investment.  I guess if investors ignored fundamentals and were trading stocks at PE ratios above 100, that is the market’s fault.

Absolutely expect foreign companies to be buying American securities.  That is what happens when you have a current account deficit.  Foreign investors continue to put money in American securities otherwise our dollar colapses to the point that we stop buying world goods and that is bad for everyone. 

http://www.post-gazette.com/pg/06269/724898-28.stm

That current-account deficit contributes directly to the nation’s total foreign debt, the value of all the U.S. stocks, bonds, real estate, businesses and other assets owned by non-U.S. residents. As of the end of 2005, total U.S. foreign debt stood at $13.6 trillion—or about $119,000 per household. Net foreign debt, which excluded the $11.1 trillion value of U.S.-owned foreign assets, was $2.5 trillion.

Later in the article:

Most economists, however, see a more prosaic explanation: Foreigners have been willing to accept a much lower return on relatively safe U.S. investments than U.S. investors have earned on their assets abroad. Take, for example, China, which since 2001 has invested some $250 billion in U.S. Treasury bonds yielding around 5 percent or less—part of a strategy to boost its exports by keeping its currency cheap in relation to the dollar.

By contrast, U.S. direct investments abroad—which would include things like glass maker Corning Inc.’s liquid-crystal display plants in Taiwan or Intel Corp.’s chip-making subsidiary in Ireland—have returned an average 8 percent since 2001, according to U.S. Commerce Department data. Meanwhile, U.S. investors in emerging-market stock funds earned an average annual return on their investments of 22.3 percent, according to financial-research firm Morningstar Inc. (The Commerce Department counts only part of that as income).

Because the U.S. has tended to borrow in bonds and similar interest-bearing instruments while investing in stocks and longer-term foreign projects, it has benefited vastly from the low interest rates of recent years. “The U.S. has been exceptionally lucky,” says Goldman’s Mr. O’Neill, “It’s like the world’s biggest hedge fund. It’s borrowing cheap money and getting leveraged returns from the things it’s investing in.”

Don’t make a problem where there isn’t one.  China and the big oil producing states buy American bonds for a reason.  We don’t default on our debt obligations.

Social Security and other entitlements are 1000x the threat that foreign debt load is. 

It is always reported how poorly our current account balance is doing, etc., but American corporations and American stockholders do well regardless of the current account balance since American Corporate holdings overseas are massive.

Maybe this is a better chart.  You want to compare to the peak.  Which follows the trend over the last 50 years better?  The peak or the sustained growth?  Looks like things are back on a moderate growth track where they should have been all along if not for the inflated markets from the dot.com boom.

NASDAQ crashed in early 2000 not after 9/11
The problem is they(foreigners) are in the drivers seat. If they get nervous, it’s game over.

“We have a dollar that’s adjusting and I am for a strong dollar.....
Our dollar doesn’t buy as many barrels of oil as it used to and so therefore it’s more expensive for the American people”..... Bush 3/12/08

The crash started in 2000, but was prolonged and worsened considerably by 9-11.  The recession started in 2001.  The combination of recession, overhyped market due to tech stocks, and 9-11 are behind the drop.

Don’t get all negative on things.  If the Chinese decide to take their money and go home here is what happens:

1.  The dollar drops in value
2.  The drop in value makes US goods and US investments even more competitive bringing in new money to make up for the shortfall.
3.  The Chinese lose tons of money on the deal
4.  Their prices become less competitive to foreign markets, especially the US, and their exports slow.

They have a reason to keep the transfer payments coming back.  Most countries currency would already have dropped to stabilize the current account imbalance, but because our economy is so much more stable than other investments, money keeps pouring in which props up the dollar.

Don’t get all positive on things.
IMO as the dollars drops investors go elsewhere.
Our goods will never be completive with Asia thats why manufacturing has been in decline.
Chinese can always go back to eating tree bark but can the US consumer stay away from the mall without going coo coo?
Will OPEC go along with a weakening dollar?
Will they speed up their conversion to euro or other currencies?

“We have a dollar that’s adjusting and I am for a strong dollar.....
Our dollar doesn’t buy as many barrels of oil as it used to and so therefore it’s more expensive for the American people”..... Bush 3/12/08

Blasphemy!!!  Lies!!!

You are saying that the tech bubble bursting, the stock market tanking, and the ensuing recession happened on Clinton’s watch?  Bill “It’s the economy, Stupid” Clinton?

Quick, somebody call the New York Times, CBS, and Howard Dean!

“Poverty of goods is easily cured; poverty of the mind is irreparable.”

Wasn’t “It’s the economy stupid” coined for Bush 41?

“We have a dollar that’s adjusting and I am for a strong dollar.....
Our dollar doesn’t buy as many barrels of oil as it used to and so therefore it’s more expensive for the American people”..... Bush 3/12/08

Why yes, everything has been STELLAR!!!

Someone please explain this graph for me. You see, I’m just an economically naïve lefty:

http://futures.tradingcharts.com/chart/US/M

D’ya suppose there is a relation between your assertion and my graph?

Wasn’t “It’s the economy stupid” coined for Bush 41?

MarkD,

No… actually the phrase was coined to keep the focus of the press and the public away from the “lies” being told about Clinton by, Gennifer Flowers, Paula Jones, Juanita Broderick, etc.

In a shrewd bit of political dissembling (lying) Democrats ran about doing their best economic “Chicken Little” routine.  The very same “worst economy since the Great Depression” bullshit that Democrats bray about every election cycle.  Sounds kinda familiar today, doesn’t it?

“Poverty of goods is easily cured; poverty of the mind is irreparable.”

No… actually the phrase was coined to keep the focus of the press and the public away from the “lies” being told about Clinton by, Gennifer Flowers, Paula Jones, Juanita Broderick, etc.

1992?

“We have a dollar that’s adjusting and I am for a strong dollar.....
Our dollar doesn’t buy as many barrels of oil as it used to and so therefore it’s more expensive for the American people”..... Bush 3/12/08

Why yes, everything has been STELLAR!!!

Someone please explain this graph for me. You see, I’m just an economically naïve lefty:

http://futures.tradingcharts.com/chart/US/M

D’ya suppose there is a relation between your assertion and my graph?

Listen Dumbass, I already did.

Don’t get all negative on things.  If the Chinese decide to take their money and go home here is what happens:

1.  The dollar drops in value
2.  The drop in value makes US goods and US investments even more competitive bringing in new money to make up for the shortfall.
3.  The Chinese lose tons of money on the deal
4.  Their prices become less competitive to foreign markets, especially the US, and their exports slow.

They have a reason to keep the transfer payments coming back.  Most countries currency would already have dropped to stabilize the current account imbalance, but because our economy is so much more stable than other investments, money keeps pouring in which props up the dollar.

Falling currency is a function of a current account deficit.  Transfer payments by the Chinese into American assets is how they allow us to continue to consume their products.  The dollar weakens as a natural response to the current account issues.  Consequently, imports become relatively more expensive and interest rates in the US rise to attract more FDI.

But there are other factors in play.  First, China keeps devaluing their own currency which the World Bank, WTO, and American workers are pissed about.  They do it to keep their exports from growing more expensive which keeps us consuming them at a record pace.  The devaluation of the dollar will actually reverse the trade deficit, which I thought was a good thing.  Problem is that because of the stability of our economic system, countries continue to hold American debt and continue to buy for a variety of reasons.

Do you understand the role of the current account or trade deficits?  How can the dollar fall in value yet S&P 500 companies continue to report record earnings?  Oh, that is right--Americans own lots of companies and industries in other parts of the world, so it ain’t all doom and gloom.

Excellent retort, genius. I found it even more enlightening the second time I read it than the first, especially with the added ‘dumbass’ part. Very persuasive way to enhance your enlightened argument. I see whatever school taught you economics must have also taught you the other critical thinking skills you have displayed in abundance.

I was going to point out the relative S&P flatness and the related chart that I posted, which curiously was not flat, might have some relationship going on…

How can the dollar fall in value yet S&P 500 companies continue to report record earnings?

I don’t know, maybe because not everyone who invests in the American stock market is necessarily American?

Could that be the reason, genius?

Go ahead, try to explain all the good things that can happen when the CANADIAN DOLLAR TRADES AT $0.90 FOR CHRISSAKE.

Since when has the Canadian Dollar not been worth dick?

I ask you guys in North Dakota, because I’m certain you get more loonies and toonies than we do in the dirty South. Could it have a little something to do with all the stellar stewardship we’ve had in the last 6 years?

I was going to point out the relative S&P flatness and the related chart
that I posted, which curiously was not flat, might have some relationship
going on…

Relative S&P 500 flatness?  Did you not see the posted graph up above?

So what you are saying is that the S&P 500 is flat over the last six years or that somehow the dollar falling is so negative that it overrides the continued strong (or flat) performance of the market?

I believe that I stated above the following in the original post:

There are major worries like inflation, high gas prices, a housing slowdown, slowed consumer spending, etc., but the market is taking these issues into account.  How can the market not?

The reality is that despite all of the pessimism in the news, American Investors still view the stock market as a good investment and are still buying.

If your point is that foreign investors are doing the same, why is that?  Is it the falling dollar that is encouraging FDI into US markets?  How do we get low interest rates, high FDI, a weak dollar, a strong stock market and maintain both a current account and a budget deficit?

Given all of the negatives, you would think that investors would be moving out of stocks and into safer securities because surely a recession or economic trouble is at hand.  But investors are not.  Neither are foreign investors.  Investors are optomistic and unemployment is at 4.4%.  Interest rates and inflation are low.  You want to pick negative numbers, fair enough, but the falling dollar has far less direct impact on the average American family than unemployment, the job market, inflation, etc.  Surprisingly, the falling dollar is not leading to massive inflation.  You think Walmart and their everyday low prices might have something to do with that?

Justin, Yes investors are optimistic Just like in 2000.
Unemployment would be 8% if you were to use U-6 the formula used back in 95
Inflation is low if you didn’t eat, didn’t drive to work, didn’t heat your home, didn’t visit a doctor, didn’t buy a house, didn’t buy insurance of any kind, didn’t have a kid in college and didn’t pay state or property taxes

“We have a dollar that’s adjusting and I am for a strong dollar.....
Our dollar doesn’t buy as many barrels of oil as it used to and so therefore it’s more expensive for the American people”..... Bush 3/12/08