Ramsey, I'm going to attempt a fairly short reaction to your post. You have had many thoughtful things to say about the Asian mess, and I think you are absolutely right to believe it is of key importance for US markets, at least potentially.
I believe the net result of the latest news from Japan is that it tends to confirm that the Japanese will continue to work their way out of their huge asset bubble and bad loan problem slowly. They will avoid any dramatic or quick solutions, which could more quickly benefit their economy and the vast innocent bulk of their population. Instead they face a worsening recession, while many other Asian countries face a Great Depression. However, any massive Japanese financial collapse which could greatly affect the US or W.Europe looks increasingly unlikely. They will manage their way through it. And as a result face several more years of very low capital availability.
Japan as a source of Asian lending is probably finished for another three years. And Japanese companies needing fiancing will have a hard time getting it.
Some Japanese companies or interlinking conglomerates are of course fully self financing, but nonetheless, I think Japanese competitiveness will continue to be stunted.
This I think is really to the great advantage of US tech companies overall. Sure they loose some sales to a sluggish Japanese economy, but they also face sluggish competitors. Whether in Japan or fianced by them. And US companies also look upon the sticken areas of East Asia and see companies desperate for GE or Intel or AIG or Citicorp or Loral bailouts.
The real economy in Asia will get worse. I think the liklihood of a Japan ignited financial implosion continues to lessen. I think our markets will continue in a trading range, as the real economy extracts slowing earnings growth from more and more US exporters. There will also be scares over the balooning balance of trade deficit, which is only getting going, and will reach historic levels. On the other hand, companies which can still put outsized earnings growth on the board because they are relatively Asian unaffected may well see even higher multiples in this extraordinary and very extended low inflation environment. I like enterprise software and telecom equipment companies, as well as Internet backbone and bandwidth companies. Mostly. I have no semi cos or semi equipment cos for example.
That's OK. They're selling to us cheap, and their rich are lending us the money to do so, to boot. ANd beyond that, they have an insatable desire to hold our paper, and even our non-interest bearing $100 bills, in truly massive quantities. The new gold bullion. Not bad work if you can get it.
Now if all that starts reversing, we could see some trouble. But I don't see it any time AT ALL soon.
Money to make in the mean time.
Ooops, I'm being called to fireworks....
Doug |
