SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Pastimes : Ask Mohan about the Market
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: tekgk who wrote (8103)11/16/1997 2:03:00 PM
From: Rational  Read Replies (1) of 18056
 
Tekgk:

I said: I do not see a boom in other stock markets; but no further down-turn. I mean other Asian stock markets, especially the Japanese.

You feel: The hard question is the no further down-turn -g-

I agree that it is a hard question. My main thrust is that the Japanese have been pushed to the corner to the point that their banks will be legally barred from international banking as their capital levels have fallen due to their stock market decline. The Japanese have a huge trade surplus vis-a-vis the US. They also have $800 bil of US Treas and they have to increase their banks' capital. They have no option but to sell US Treas and use the proceeds to buy preferred stock in Japanese Banks to prop up their capital -- this is the only solution left to them. This action will trigger a sudden fall in US$ value, a small rise (or no fall) in Japanese stock prices, a rise in over-night US$ interest rates as the Fed comes under pressure and the Japanese trade surplus compounds the problem. Thus, US stocks (especially interest rate sensitive stocks) will be under pressure next week.

There were rumors that in the US, when Citicorp was failing to meet capital requirements in 1990, Fed and US Treasury made secret deposits in Citicorp to help the bank continue international banking. Then the Fed cut rates to help boost the US banks as Clinton triggered a federal deficit reduction program. This helped US stocks and economy tremendously, but with a rising trade deficit.

Now the US $ and economy will start to recede quite a bit until there is international equilibrium in the monetary system. The Germans have astutely raised their interest rates. The Fed will have raised (IMO) the rate if they knew of the Japanese move. The Fed did not raise the rate mainly to help alleviate the crises in SE Asia. I think, though, the Fed did not know of the Japanese move which is bound to be implemented soon to rescue Japanese banks.

Sankar
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News