Roebear:
We are at a psychological pinnacle of self- approval in collective assessment of our domestic economy. Much like the desire to accolade the Japaneses for their economic brilliance at the 1989 Nikkei market top. However, as demonstrated by the broader market of equities, cyclical influences in our economy are beginning to establish a pattern of dissappointment, and reevaluation of economic strength. Economies grow, plateau and struggle; the cycle is never ending, only the duration of each sequence changes. Inevitably, they must be cyclical in a world composed of a species that also are cyclical: they adolesce, have children and home, retire, and die.
Apart from that, Japan, actually, is close to the road of recovery. The key will be a broad, deep income- tax stimulus, without which, the economy will continue to show anemic results. Should a package be forthcoming, not only will their markets improve dramatically, but it will keep our equity market from a swift collapse. It is much easier to suffer the anxieties of smaller, punctuated bear- markets (as began in 1966, then '69, followed by '73-'74), than experience the panic, collapse and devastation to our economy of 1893-97, or 1930-1939. Paranthetically, the precious metals do well in either enviorment.
The recovery in Japan will be first apparent in the value of their currency. As their currency recovers in dollar value, it will make the return in their markets that much more desirable. Equally, the return on invested capital in the US will suffer in the translation. Because the recovery in Japan is the economic and psycholigical linchpin to recovery elsewhere in asia, those countries under duress now will also begin to recover. As their currencies appreciate, so does their ability to honor their foreign commitments,( denominated in foreign currencies.) As we, and much of Europe, are creditors in addition to the primary creditor,Japan, economic growth interrupted by the crisis is reestablished, and in those economies in the beginning growth cycle (Japan,Germany, France etc.), the market- growth opportunity will be dramatic.
The same, however, cannot be said for economies now at full-employment, tepid productivity growth, capacity constraint and per-capita debt levels at historic limits. It will be the inability to service greater debt load( already in evidence by the rise to above historic levels in personal bankruptcy and debt delinquency in 1997) that will begin the plataeu and end in the subsequent contraction of our mature economy. Should we be fortunate to suffer prolonged stagflation, and escape the perils of a worldwide panic( which could very well result in hyperinflation or deflation,) I should think we've done pretty well in light of what is before us. I am not, however, that optomistic that it can be avoided; we are in an historical context, very near and very due.
Whatever the end result, it will not be quite as anticipated, and indeed, it may come to something never before experienced; but I believe it is very easy to acquire an asset on the cheap, especially so, after a prolonged counter-cyclical trend in light of the economic change we are undergoing. The precious metals stocks stand in stark contrast to the performance of the market as a whole; it takes no measure of brilliance to see the significant value and opportunity that lies in buying these now.
Yours, T.V.H.
|
