Looksmart Limited (LKST)

[andy20020]

Market Info from weekly newsletter ... Everybody and their dog knows that the dollar is going lower. The debate is
only about how far. If the Fed were to allow interest rates to rise as
foreign central bank buying slows up, that would trigger higher home
mortgage rates, which would put in jeopardy home values. Deflating home
values, as Weldon points out, is the last thing the world or the Fed wants
to see.

If the world (read China and Asia) pulled the plug on the US dollar, which
they could do in about 15 minutes, the result would be a world wide
depression. Nobody wants that. Everyone's interest is aligned in keeping
the game going. They want the Us to keep buying and they want to keep
selling.

However, it must now becoming apparent even to central bankers that the
current trends cannot continue. You cannot keep racking up $500 billion
trade deficits forever. You cannot keep adding up $500 billion dollar
government deficits. We no longer simply "owe it to ourselves." Since
foreign governments are buying an ever higher percentage of US government
debt (they currently are at an all-time high of 46%), the current trend if
left unchecked means eventually the US government owes trillions to foreign
nations. When you are increasing the foreign debt by $500 billion a year,
it does not take long.

A rise in rates would mean the US would owe hundreds of billions of tax
dollars in annual interest payments to foreign banks, unless the trends are
stopped. Such an event would mean an unraveling of the current world
economic structure.

Thus, the dance truly begins to allow the dollar to drop. Hopefully slowly,
while the Fed keeps rates low, hoping the US economy can begin to produce
jobs.

The Fed issued a statement after its meeting this week. It was word for
word the same as the one in August, with two minor differences. The one to
pay attention to was "a phrase in the next to the last sentence in the
second paragraph. In August they said ...... 'labor market indicators were
mixed'. In September they rephrased that to..... 'labor market has been
weakening.'" (Courtesy of Art Cashin)