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Gold/Mining/Energy : Bema(Bgo) and Arizona Star
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To: the Chief who wrote (8551)11/23/1997 3:51:00 AM
From: Terry Swift  Read Replies (1) of 10482
 
Chief:

Hey, we agree on something; actually several things. I also think we've seen the lows in BGO/AZS and gold. And anyone who thinks the Asian currency crises won't affect the US markets is kidding themselves. Like you, I believe it will boost US bonds and the dollar in the short term as the 'flight to quality' continues into those assets but at some point the dollar will start to weaken and then the "shiny stuff" will be the last refuge.

In the same news report in which I heard that Japan's 4th largest brokerage firm was bankrupt, they also said that the Japanese banks are in such bad shape with non-performing loans that if the Nikkei drops below 16,000 virtually all of Japan's banks will be technically insolvent; i.e., more debt than assest on their balance sheets. The BOJ can prop them up for a while but ultimately they are headed for bankruptcy and liquidation. I expect Japan will, at some point, sell its $600 billion of US bonds to try to bail out its banks.
Some sectors of Japan's economy are contracting at a double digit annual rate. I can't see how Japan can or will keep buying US debt at the expense of its own economy. I don't follow the bond market very closely but its obviously being pushed up by scared foreign money right now. That is the hottest of hot money and won't stick around long. The dollar is the key to everything right now. Its perceived as the safe haven but that will change and some of that scared money will move into gold. It won't take much to push it back to the $325-$350 area.

Terry
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