Roebear, Almost since I came on this board a year ago, I argued that Asia would have a spectacular recovery from their recessions. I did so on the basis of spending wave demographics. Japan's birth cycle is completely out of sync with the rest of the world. This, in my view, is the TRUE reason why Japan is in such difficulties. The expression "pushing on a string" comes to mind. Have I cheered when Japan's economy improved slightly this past year - yes. But I have always always always said that Japan's economic sun has set for the the forseeable future, and that other countries would assume economic dominance in Asia. The countries that I believe are in the process of doing that right now are Korea, India, Australia, Greater China, and Malaysia. Why? they have population in place to support internal consumption - Japan does not.
People have a very difficult time understanding the concept that economies rise and fall with demographic spending patterns. This is because people are so insistent that economic cycles are determined by fiscal and interest rate policies. The truth is that these policies always follow from demographic realities, ultimately they do not drive them. The "Pushing on a string" phenomenon is a classic manifestation. Actually, demographics now allow economic cycles to be determined with the same surety as insurance companies use actuarial tables. I expect that last statement to be met with howls of derision, but it will not change the fact that commodity and economic cycles in the US have followed the spending wave model almost perfectly for as long as there is data. There was one time it failed. Want to know when? The Civil War. That was when the flower of American manhood perished on the fields of Gettysburg, Fredricksburg, Cold Harbor, etc and so forth. That in itself reinforces the theory, in a desultory sort of way. What the spendwave CANNOT predict, is the FOUR HORSEMEN OF THE APOCOLYPSE, War Famine Plague and Bald men from Mars. <GGGGGGGGGG>
Japan, is now in a period of demographic transition very similar to the ones we experienced during the Great Depression and the Seventies. Fortunately for Japan, they are a lonely island of recession in a sea of booming economies. This is why they will not completely fall apart. In my view those who believe Japan will induce a crises that drags the whole world down will be sorely, sorely disappointed. That time is long since past. Boom 2000 is on, those whole think, it will be stopped by Japan will get a very rude awakening. My bet is that Europe turns in 3% growth this year, Latam 5%, Asia sans Japan 8%, The US and Canada 5%. If you give me choice between tax increases and monetization of Japans debt - I pick monetization. I believe the correct interpretation of the state of Japans cycle right now is to identify it with our cycle in the Seventies. Heavy Govt borrowing, rising inflation, banks in shambles, soon to be an incredible drop off in productivity, etc and so forth.
Sorry for rambling on, but there it is. As always.
JMVVHO
Bull
PS and BTW I still stick to my intermediate target on the Dow of 16000, with a penultimate top in the 30,000's. I believe the recent lows on the S&P 1350 will be revisited and may even be breached on a very short term basis. I had expected something on the order of a 10 to 15 % correction in the major indicies due to the rampant speculation in tech shares. I believe that to be precluded by the incredible, almost Deus ex Machina like rally in treasuries. 5 to 7% decline should do it. Well there I go again - Poor Old Blind Bull, eyes bulging, frothing at the mouth, and redolent of reckless emotionalism. Oh well. <GGGGGGGGGG> |
