Mike,
Did you read Barron's today? Interview with Al Edwards (name?), who allegedly was calling the Asian "miracle" nonsense back in 95, and stuck to his guns despite widespread criticism. Sees considerably more downside. Says Hong Kong real estate market is still deflating, and sees their market going to 5,000 (now around 10,000), as well as more declines elsewhere. Wary on the US market, although he throws out the liquidity factor as possibly holding up the market for awhile longer (although he has reservations about using that as reason). Sees the US market going as low as 5,000, if I recall correctly, but not soon. Bullish on Europe, though, for the next couple of years. Sorry I can't post the article, but if you have a subscription to Barrons Online, you can get it. Or buy the thing. This interview is the article that makes it worth it this week.
One of his other claims is that US institutions apparently are borrowing money in order to buy other people's paper and equities, and if you ex out this financial borrowing, there has been no net growth in bank borrowing for awhile (I forget how long, don't have the article handy). Sounds like deja vu all over again, although it still isn't quite as bad the Asian companies that bought other companies' equities back in the 80s. He says that this is why, if the Fed raised rates here, it probably wouldn't affect the real (goods producing) economy much, but would prick the "asset bubble" that is developing, and (as others have been saying for awhile) it would be better to do that sooner rather than later. He also talked about the "container" crisis that we have spoken about on this thread (no containers in Asia, too many outside, due to the phenomenal rise in exports).
He says M3 money growth has been at 13% for the past year (I think the last year is the time frame given). I didn't quite follow this part of his argument (especially what he means by "L", and how he computed it), so would appreciate it if anyone could clarify it.
And of course, I welcome any and all responses/corrections to the article.
Best,
Sam |
