Hello Pezz, <<... Just before tomorrows peace rally!>>
We must be looking at different markets and do not have the same macro expectations;0)
We are still on the Script of Deflationary Collapse to be followed by Epilogue of Inflationary Cleanup, spice by War, or garnished by Protectionism. Under these circumstances, any rally is a chance to sell, and any panic is an opportunity to not buy.
<<... buyin me a Jeep Liberty and goin ... fishin for a coupla weeks or at least till all this blows over>>
Just drive whatever you are driving now into the ground, go fish, and come back to a cheaper Jeep Liberty after a coupla weeks or 5 years when all this blows over.
<<you get a chance to average down und I hafta average up>>
Eitherway, some rules apply:
(a) Macro rules the primary trend
(b) Trend is your friend
(c) Conviction kills
(d) Total conviction kills completely
(c) At end of bear market, all bulls and half of the bears will be dead
(d) At end of bull market, all bears and half of the bulls will be dead
(e) Thus, in the long run, all bears and bulls will be dead
So, Pezz, the game is dangerous, getting less fun with each passing session, leading onto bankruptcy. Exercise caution and trust self-preservation instinct.
As the pie gets smaller, the guy with the biggest piece of moldy cheese cake wins.
Here is how the pie gets smaller for two different geographies:
markets.scmp.com
Tuesday, September 17, 2002
Hong Kong follows Japanese route into deflationary hole
JON OGDEN
Have Hong Kong and Japan taken different routes but ended up falling into the same 20-foot hole known as a deflation trap?
Japan has been practically written off as a deflationary basket case by international commentators for some time now. The arrival of a new premier, such as Junichiro Koizumi last year, may cause a brief flurry of optimism, but one step forward seems inevitably followed by two steps back.
Hong Kong is increasingly being mentioned in the same breath as Japan and there are some striking similarities. The scary thing is that Hong Kong may ultimately prove to be in a worse position than Japan.
What the two have in common is a deflationary bust. Land and stock prices went through the roof in Japan during the 1980s only for the bubble to pop in 1990 when interest rates were belatedly raised. Since then, the economy has drifted in and out of recession, land prices have dropped by 80 per cent and share prices are near 19-year lows.
The decline in asset prices has caused a collapse in the real economy. Prices have fallen for 34 months, leading to shrinking profits, job losses, lower consumer spending and more spending cuts. Bank lending has dropped for 56 months. The cruel truth of an extended bout of deflation is that while revenues - and household incomes - plunge, the nominal value of debt stays the same and repayments get harder.
Even the radical step of taking interest rates to zero has failed. To some, this graphically illustrates how a debt-induced deflationary bust can become immune to remedial policy action.
"The lesson from deflation is don't get in it," said Peter Tasker, a director of boutique fund house Arcus Investment in Tokyo.
Unfortunately, Hong Kong has not been able to learn the lesson. Hong Kong enjoyed its debt-fuelled asset bubble in the early to mid-1990s before the Asian financial crisis came along in 1997 and pricked it. Property prices are down 60 per cent and the Hang Seng Index has fallen by half since the global technology mania drove it to a peak in 2000.
Deflation has also kicked in with 34 months of price declines, unemployment and personal bankruptcies have hit records, while bank lending has also been on a Japan-style downward spiral.
Even the policy response in Tokyo and Hong Kong looks similar - muddle through and pray a United States recovery will lift all economic boats, even those sinking under deflation. Some bullish commentators like to point to the relative health of the SAR's banking system against its counterpart in Japan.
But this overlooks the other side of the equation. You can have healthy banks and super-low interest rates, but if over-leveraged corporates and consumers are hunkering down and battling to pay off debts, rather than seeking to take on new credit, the result is the same.
In Japan, the problems have gone beyond mere economics and politics into the arenas of culture and mass psychology. How do you tempt the deeply conservative Japanese consumer out of his shell?
Hong Kong has not quite gone as far down the road as Japan but it is catching up fast. Just take a look at the sales going on in shops around town. Huge mark-downs are the only way retailers move stock.
The SAR's deflationary bust may be worse than Japan's because of its unique factors. It is a service-oriented economy with a highly mobile population. The talent will stay here for only as long as the low tax base and high wages make sense. Deflation and job losses are making the overseas options most middle-class Hong Kongers have up their sleeves more attractive.
"Everybody is just thinking of staying for a few years, making a bit of money, then getting out," a broker said.
There is also the small matter of Hong Kong's efforts to find a role in the China picture rather than be bypassed as an expensive irrelevance. Add another leg to the deflation story.
All the way down there have been analysts telling us to buy stocks because Hong Kong is recovering. If we take a look at the road map Japan is providing, we can see why these calls have failed to pan out.
Chugs, Jay |
