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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Digger Sacket who wrote (6866)7/18/1999 12:33:00 AM
From: marc ultra  Read Replies (2) of 15132
 
Digger re China/Taiwan: This is an important issue to raise. As Bob noted today one of the factors being priced for perfection at these multiples was a stable international situation. Few things are going to be more destabilizing than if China militarily attacks Taiwan which is getting close to reality if Taiwan doesn't quickly and clearly back down on its independence rhetoric, something that may be difficult given positioning for upcoming elections. If China attacks despite US warnings that the situation must be settled peaceably we may again send a bunch of carriers and other military assets. With their embassy bombing fresh in their minds China may be in a mood to show the US their show of force will not deter them and proceed with their military attack and possible takeover of Taiwan. Taiwan however has a very competent military and we could have a major mess. Unlike Kosovo which was a big yawner for the markets this will be a major event and Asian followed by other emerging markets should get hit very hard and at these multiples the US markets would also take a dive. My understanding is that the next few days will be crucial as to whether Taiwan will back off its independence rhetoric enough to satisfy China and just leave things tense but not explosive. It's these kind of things that can come out of left field that are not predictable way in advance that can be a trigger to turn an over valued market to a bear.

Marc
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