[CrashList] Signs of a bubble?

[Chris Burford]

Was this article from Forbes of 7th August (below) discussed here or elsewhere?

There seems some overlap of evidence with that in the article Mark posted on 11 June entitled
The bubble that has to be burst


But the chart accompanying the Forbes article shows the really big expansion in inward flow of finance is into US treasury bonds, and to a lesser extent, into US corporate bonds. The inflow into US equities has taken twenty years to push up the share owned overseas from 5% to 8%.

This suggest a hypothesis that a slowing of the US economy might not burst the bubble, so long as other economies slowed more, or at a comparable rate.

Or is there some subtlety about why overseas fundholders prefer to put their money in US corporate bonds than in US equity?

Chris Burford
London

_______________________


August 7, 2000

Quietly, foreign ownership of U.S. securities has reached extraordinary
proportions. But any reversal could be loud.

Charticle

By Peter Brimelow

Sign Of A Bubble?

IS THE U.S. BORROWING ITS PROSPERITY FROM FOREIGNERS? THE CHARGE
WAS COMMON AT THE height of the Reagan boom in the late 1980s. But lately it
seems to have disappeared. Funny thing, because now it's probably true.
Daniel Bernstein, research director of Westport, Conn.-based Bridgewater
Associates, says the phenomenon is partly benign--reflecting the greater
integration of global capital markets, to be viewed in the context of U.S.
ownership of foreign securities. But it also represents the financial consequences
of the current U.S. account deficit. Capital inflows from abroad match the excess
of imports over exports.
"Interest rates have been lower because foreigners have seen the dollar as a
store of value," Bernstein says. The problem: If the economy and/or the dollar
weaken, foreigners might change their minds in a hurry. "If you think the market
is a bubble," says Bernstein (who tends to think it is), "all this could help it pop
faster."

URL is http://www.forbes.com/forbes/00/0807/6604080a.htm