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Pastimes : Ask Mohan about the Market

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To: Zeev Hed who wrote (8156)	11/16/1997 6:56:00 PM
From: Rational	Read Replies (1) of 18056

Zeev: Yeah, no floorless convertible preferred stock of CTYS! <VBG> The preferred stock will be bought by the Japanese Govt pension plans and insurance companies and so there is no impropriety. Infusing bank deposits will decrease the risk-weighted assets and hence improve the capital/risk-weighted assets ratio. But, with a limited $800 billion (for so many Jap banks), they cannot achieve a sufficient lift to the capital ratio unless they make capital infusion because the Jap bank capital levels have fallen dramatically. The logical route is (non-convertible!) preferred stock which acts like deposits at fixed interest rates, while going to the capital portion of liabilities. Once they sell the US Treas, they will get US$ which they will need to sell in the open market and so both the dollar will fall against yen (hurting Japanese exports) and US interest rate will rise. [In a standard case, when the Fed raises interest rate (with no massive sell-off of dollar by others), the dollar firms up.] This also means that dollar may rise against other currencies, while it falls against yen. The Japanese exports will suffer, no matter what. Sankar

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