[PEN-L:8286] Re: Re: Here we go again!

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Unfortunately, Greenspan still has a great deal of reserve monetary power at
his dispoasal.  It is highly unlikely that the US economy will crash before the
next election.  But Greenspan would have to pay a high price for postponing the
inevitable.

We have shifted from the goldilock economy (just right) to the yo-yo economy
(sequential lossening and tightening globally).  Wealth is created by lifting
the depressed sectors with high tech glamour and the bailing out disappointing
high tech with IT hope, all the time multiplying P/E ratios, with the Fed
providing the liquidity to finance it all.  There are now so many internet
paper millionaires who are spending on credit collateralized by stocks that
they cannot and dare not sell.  The average formula for internet companies is
to mushroom a $300k cash investment into a $300 million market caotialization
at IPO in three years and hit the billion dlloar mark shortly thereafter.  That
is over 300% compounded return per year with no cash flow to justify it.  Now,
it takes a Phd in economics to avoid seeing the invitable bust.
Greenspan says no big deal, he is ready to pull another rabbit out from his hat
like in 1987 or 1998.  The only reaons the US has low inflation are because
equity price is not in the inflation basket and because the US has been
exporting deflation globally for the past two years, and the trickling down of
wealth has been minimum.
Bush won the war over Iraq and lost the economy.  Gore is not about to make to
same mistake, (he will make other mistakes instead).

Henry C.K. Liu

Rob Schaap wrote:

> >Here we go again, setting Asia and Latin America up for another financial
> >crisis a year from now.  The average timing will be one crisis every two
> >or three years to repatriate all surplus value from the periphery back to
> >the core.
>
> Might be quicker than that, Henry!  My (admittedly simplistic) take on this
> is that if too much money leaves America too quickly (pre-hike escapes and
> concomitant bouncing Asian markets in general, all combined with the whiff
> of a fragile but rapid Japanese rejuvenation), that changes the
> significance of the current account, the reliability of Wall St projections
> (against and for which much borrowing has been done), the faith put in
> hedge funds (still ever-so-secretive regarding their investments, but now
> with a big dark precedent planted in the public mind), and the value of the
> greenback.  If America's heroic consumer suddenly pulls her head in, we'll
> get pretty dramatic capital destruction everywhere, no?
>
> I persist in amateurly manic bearishness, I know, but what else can a bloke
> do when nothing makes any sense and the whole world economy seems to be
> predicated on one over-extended economy sucking in everybody else's
> product?  That's balancing an awfully big angel on a very thin pin, no?
>
> Night all,
> Rob.