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Gold/Mining/Energy : Gold Price Monitor

GDXJ 105.34

+5.2%

Nov 26 4:00 PM EST

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To: Gabriela Neri who wrote (13848)	6/27/1998 8:24:00 PM
From: Henry Volquardsen	Read Replies (2) of 116768

If the Japanese banking system did collapse and bring down the Japanese economy then, as you say, the US and Europe would have a big problem. But as bad as the Japanese banking crisis is it is not on the verge of bringing down their economy. It also appears that the Japanese are finally making some moves to address the problem. Late last week there was a lot of talk in the markets about a shotgun marriage being arranged between Long Term Credit Bank (arguably the sickest bank) and Sumitomo Trust. Also a number of foreign banks are ready to step up and buy some of the Japanese banks and inject capital. I heard an interesting comment a few weeks ago on CNBC. An analyst was pointing out that when a major democratic developed economy has a systemic economic problem it generally takes about 10 years for them to go through the process of recognizing, accepting, analyzing and then acting upon the problem. The US with the Savings and Loan crisis was one of his examples as was the post Viet Nam inflation. Japan is approaching than 10 year point. The contrarian in me is saying the doom and gloom about Japanese banking is probably reaching a peak crescendo. Japan's banking system will not collapse, the country has too much capital. It is merely an issue of them finally having the political will to do something. This is very similar in substance, although of a larger magnitude, to the process the US went through with the S and Ls. I am beginning to wonder if we will soon have an opportunity to buy Japanese banks at prices the equivalent of buying Citibank at $8. BTW if I am wrong and this does lead to a domino collapse then it would be my opinion that it is not factored into commodity prices. Such a global collapse would spark a major deflation and commodity prices would go much lower.

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