John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (6169)	5/22/2002 11:30:37 PM
From: macavity	Read Replies (2) of 33421

Japan. My problem has always been that I expect things to change faster than they do. I have giving up predicting as I am always (always) too early! Japan is a mess - no doubt about it - but that does not mean that good things cannot happen from it. There are still too many people performing tasks that they would not be doing in other countries. 1 in 7 are in the employment of the (bankrupt) construction industry and there are a myriad of other reasons why things are bad. The catch is it has a consumer base with finances that is second to none in the world. (Admittedly the government is trying to plunder this to prop up as opposed to cure the economy.) From an asset allocation point-of-view I think the Nikkei-225 may have made a long-term bottom. It is more bullish than the $SPX and other european indices. If you seperate the banks and the construction companies, the rest is not just average, but actually good (tech exc.). In essence all other sectors have undergone some sort of consolidation/rationalisation apart from these 2 LDP strongholds - cars, pharmaceuticals, steel etc.,etc.are all doing well. If you pick a Japanese sector that has been forced to compete on the world stage over the past 5-10 years then you probably have as good a company as anywhere else in the world. They are all moving production to Asia and China especially. So Japan is a question of sectors, the blind selling has stopped and I reckon the buying may be about to begin over the coming year especially as $USD is now taking a bath. As to the great big debt problem. Hmmm. This year they have reduced guarantees on deposits to accounts of 75,000USD , next year it goes completely. I think that there has to be further bank consolidation at the least, or maybe a full-scale run on the banks. We have talked about this possiblity before. It has the potential to dwarf all the Savings and Loans fiasco, by a factor of at least 10. So after much rambling what is my summary. The Nikkei is not yet Long-Term Buy and Hold by any means. Monthly charts just do not say it (IMO), but I feel that the market is discounting improvement over the next 2 quarters to 2 years. Until then it is a trade rather than an investment. The economy may well be getting ready to turn. What is required is either the LDP lose (almost impossible), or something occurs that forces them to clear up the banks and the financials (more likely). Until then people will still be buying bullion in Ginza! JGBs - keep well away - too many in circulation and increasing! Maybe that's the (domestic) trade - short JGB's Long Nikkei -macavity

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