Re: Is Bernanke Behind The Rallies? Reply to Barkley

["Niggle, Christopher" <Christopher_Niggle@xxxxxxxxxxxx>]

 Barkley, others interested: Well my remark was based upon an article in the
LA Times about a week ago which reported estimated net capital inflows into
the US increasing over the past few months in spite of lower interest rates
in the US and despite speculation that the dollar would continue to fall.
The article (whose author or date I can't remember, senior moment...)
speculated that the capital inflow might be going into stock funds, which
helps explain the recent runup.  Other data does show net (domestic) flows
into stock funds increasing over the past few months as well, so maybe both
of those things are happening.  I don't think the data on net capital
inflows are very good, are they?  I seem to remember reading that a lot of
the data are estimates from residuals.

Chris

-----Original Message-----
From: Barkley Rosser
To: Niggle, Christopher; Gary Santos; TheNewForum@xxxxxxxxxxxxxxx;
pkt@xxxxxxxxxxxxxxxx
Sent: 6/19/03 1:50 PM
Subject: Re: Is Bernanke Behind The Rallies? Query to Barkley
Importance: Low

Chris,
     I was not aware that the most recent runup in the
U.S. stock market was due to foreign inflows.  Is that
the case?  It certainly would not make sense.  They
would have been doing much better staying in their
home markets in recent months, which was the point
of my remark.
     From all I've read it has been excited Americans
goofy over our "victory" in Iraq, along with the steady
decline of interest rates.  Certainly the decline of the
dollar does increase the possibility of profits by some
American companies, which could ironically partly offset
the exchange rate issue for foreigners.  However, it is
well known that most investors, and certainly American
ones, suffer from the "home-equity premium," which
ultimately boils down to people simply not paying any
attention at all to what is going on abroad.  So, most
American investors are simply unaware of the
opportunity cost they have been paying by dumping
their money into the U.S. stock market.
Barkley Rosser
----- Original Message -----
From: "Niggle, Christopher" <Christopher_Niggle@xxxxxxxxxxxx>
To: "'Barkley Rosser '" <rosserjb@xxxxxxx>; "'Gary Santos '"
<evs@xxxxxxxxxxxx>; <TheNewForum@xxxxxxxxxxxxxxx>;
<pkt@xxxxxxxxxxxxxxxx>
Sent: Thursday, June 19, 2003 1:23 PM
Subject: RE: Is Bernanke Behind The Rallies? Query to Barkley


> Barkley: Is your point that the cheaper dollar makes investing in US
stocks
> attractive?  I notice that most of the inflows into stocks and stock
funds
> seem to be foreign. But wouldn't foreign investors worry that the
dollar
> will continue to fall, reducing the expected return on US stocks in
their
> own currencies?  I'm not sure how this works.
>
> chris
>
> -----Original Message-----
> From: Barkley Rosser
> To: Gary Santos; TheNewForum@xxxxxxxxxxxxxxx; pkt@xxxxxxxxxxxxxxxx
> Sent: 6/18/03 1:39 PM
> Subject: Re: Is Bernanke Behind The Rallies?
> Importance: Low
>
>     It should be kept in mind that the rise of the
> stock markets in the US has barely kept pace
> with the decline of the value of the dollar against
> the euro.
> Barkley Rosser
> ----- Original Message -----
> From: "Gary Santos" <evs@xxxxxxxxxxxx>
> To: <TheNewForum@xxxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
> Sent: Tuesday, June 17, 2003 3:26 AM
> Subject: Is Bernanke Behind The Rallies?
>
>
> > I've been watching all the markets rally. I wonder if Bernanke's
hint
> of
> > extraordinary measures to liquefy the markets (in this case the
stock
> > market) in his November, 2002 speech is behind these rallies. I
don't
> see
> > any fundamentals to justify the size of this rally.
> >
> > In my market, money is being placed back in the hands of consumers.
> Foreign
> > funds account for 3/4 of the volume. Certainly, this is money to
spend
> ...
> > or to save. The central bank is offering a 10% tax free 5 year bond
--
> about
> > 70% above the short term rate. I wonder.
> >
> >
>