4/3/08 New Mexico perspectives and update on market

The government continues to innovate means to unfreeze credit markets, accepting unwanted debt from the largest investment houses. the game remains the only one in town, to assert american finance at the center of global capitalism. This requires that deleveraging of speculation be unwound in order to restart the leveraging excesses anew. but the Fed seems to fear the consequences for the global credit markets and dollar superiority of letting bad debt fail. thus the unwinding of leverage is being simply put off with the idea that with sufficient passage of time the bad debt will again prove liquid. can this strategy succeed? a guess requires a return to survey the economy.
Financial wealth has been dependent upon the bet of leveraging on constantly appreciating assets and commodities, coincident with a rapid growth in dollar-backed debt vehicles in global finance circuits. South-east asia has become the world's factory. so-far these economies have been unable, or unwilling, to absorb their surplus. They remain overly dependent upon exports, especially to the us, and thus accumulate dollar debts. these dollar debts possessed by foreign interests in the form of treasury bills allow americans to consume with a dollar gradually losing value.
it can be expected that south-east asia will in time acquire greater momentum of their domestic economies, allowing a greater portion of the surplus to stay at home. this domestic enlargement of their econs will also provide greater freedom from the present need to support a devaluing dollar.
for its part, the us must protect the great advantages adhering to the dollar's role as reserve currency. the fed is currently involved in emergency actions to provide liquidity to global credit markets, this is having an historic weakening in confidence in the dollar. global inflation of commodities is one symptom of this erosion of confidence. the more rescue operations engaged, the weaker the dollar's appeal.
we can expect that the fed will not lower further the discount rate. confidence is already too shaky in the dollar. the gov will attempt to reflate the housing market, to put a floor under the fall in prices through tax policy allowing tax deductions for buyers of foreclosed housing and extending fed guaranteed home mortgages to a wider range of homes. a floor may be reached, but the rapid appreciation of home prices will go missing without a return to lax mortgage lending standards. but future securitization and leveraged speculation on home assets will be a long time in returning.
what might play the future role of housing for leveraged speculation? long-term, dollars will pump into emerging markets
the dollar's value must be defended if it is to take advantage of its primacy in global finance to invest and extract surplus from foreign production.
long term investment: 25% should be in emerging markets, though there will be abrupt ups and downs. the us has advantages in finance, technoloy, biotech and maybe green tech. of course, commodities and their producers, as well as military suppliers are highly profitable.
specific stocks: corning, comcast