I recently read the quote: 

"Could it be that all the bruised and battered hold-outs from '00-'03 will finally join in and we resume the incessant trek toward the summit of market-based capitalism?"

Perhaps partially, but they're certainly not the key drivers in the market's recent run (without a significant dip). I suggested a couple of years ago that, though it might be counter-intuitive, an ever-increasing deficit in our balance of trade is actually a GOOD thing for the market.

Many words have been expended attributing ever-falling bond prices to the re-investment of these excesses. However, foreign interest in American assets goes well beyond bonds. Americans, as individuals, as corporations, and as a government have considerable assets - worth many trillions of dollars. And for the last several years they have been for sale - cheap - and getting cheaper.

Though the Dow and the S&P may have had impressive runs, so too have many of the major markets of the world. Back in '01 when everything was going to hell, Friedman of Stratfor hammered at the idea that the situation was unusually precarious because world markets, generally asynchronous, were, for once synchronized. He believed asynchronous markets were preferable as that gave asset allocators a range of choices in which substantive risk could be balanced with relative safety - with the exception of the Great Depression, there had always existed profitable markets.

I'm speculating that we are currently experiencing the opposite of Friedman's in-sync bear markets. And while our trade imbalances have contributed to our market's upward move, the fact is that governments, worldwide, contribute also by over-printing their currencies. As a result, with a few anomalies, it's become very difficult to find a "bad" market - but it's easy to find bad stocks (I know).

Additionally, commodity prices, despite recent setbacks, remain very high. Art, and I don't mean just the work of the masters but crap like Warhol's stuff, is once again selling at incredible prices. I understand coin collecting is once again becoming hot with higher prices not necessarily tied to metallic content. And other collectibles, at least from the occasional hour spent watching the Antique Road Show, are also escalating.

Wrapping it up, I see the current situation resulting from our trade deficit creating necessary purchases by foreigners, tax cuts increasing our own expendable funds, central banks creating lots of extra cash (some available at below market rates), and the re-emergence of the "battered hold-outs." The latter, though, are buying some of the other "real assets" mentioned.





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