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Strategies & Market Trends : Asia Forum
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To: Don Earl who wrote (134)12/25/1997 3:36:00 PM
From: Rational  Read Replies (3) of 9980
 
Hi Don:

Thanks for your details. I was simply offering my perspective.

I find it hard to believe that US companies own 60% of banking and insurance globally. I would like to have facts. But, my feeling is that they own virtually nothing in Asia or Africa and a trickle in Europe. They may own a lot in Mexico and Latin America, but not much in Canada.

<< The Mexican "crisis" and subsequent IMF bail out didn't seem to hurt US profits. How many US cars are made in Mexico now? How many "Assembled in Mexico" labels do you see on products these days compared to a few years ago? Who gets the profit?>>

Mexico is very different from Asia. Asian companies have been competing with the US companies chick by jowl (in auto and computers, not in banking, insurance or aircraft). This has driven down the profits of American companies in those areas in which Asians are competing. This competition will likely worsen as the Asians have little foreign exchange to import and are forced to export as much as they can. The US and the west will be flooded with cheap and high quality Asian imports. It has happened in 1997 and will continue to happen in 1998.

The smart money in the Wall Street is flowing in to "safety" like utilities, Airlines and Treasuries because of a belief that there will be margin squeeze in every other sector due to competition from Asia and Europe.

Eventually, I see the all-time high US$ will devalue and US interest rates to rise to bring about an equilibrium in trade surplus and the survival of the US companies; a very different picture from what you see. The same Japanese, Koreans and other Asians who have made a run on their own currency and fled to US Treasuries will one day sell off their Treasuries, putting a lot of pressure on the US$ and interest rate. [This seems to be a real fear of the US policy makers.]

With all the best for your investment,

Sankar
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