<< I think Japan has stabilized>>
From theStreet.com today:
Things are looking rather frayed in Japan. The parade of companies
announcing loan exposures to the failed Japan Leasing continues,
and the market is worried that Nippon Landic and Nippon Enterprise
Development -- like Japan Leasing, nonbank affiliates of the ailing
Long Term Credit Bank -- will also go under. Tomorrow brings the
tankan report, the quarterly read on business sentiment, and
Japan's most important economic report. It's not expected to be
good.
And then there's Nomura. Moody's cut the brokerage's long-term
debt rating to A3 from A1, and its short-term rating to Prime-2 from
Prime-1. "The substantial losses reported in its U.S. real-estate
business and proprietary trading are indicative of Nomura's risk
profile and vulnerability to adverse market conditions," Moody's said.
Bad news for Nomura, which shed 5.3%, and bad news for the
Nikkei, which fell 415.04, or 3%, to a 12-year low of 13,406.39.
A Merrill international stock analyst just said similar things in less detail on CNBC.
There is a really deep recession/depression in parts of Asia. Japan is sinking into a steep credit crunch recession. As the banks further consolidate the credit crunch looks to get worse before it gets better, as the banks struggle to survive, and slowly rebuild their equity bases. Holding U.S. treasuries is safe. Extending or even rolling over loans to struggling Japanese businesses, except perhaps the Sony and Toyotas is not. Japanese banks have for years been rolling over loans that show little prospect of ever being repayed, originally extend as they were in the days of halcyon real estate prices, huge stock valuation, and enormously expanding trade (the late 80's). Now finally some of those loans are being marked down, and some not rolled over. Which means bad things for the real economy for a while. For years Japanese financial institutions have been very reluctant to extend new credit at home (the 90's). Now they are being forced to liquidate some of their loans, rather than rolling over.
I don't like this. I am not temperamentally a bear. Didn't turn bearish until the very beginning of August. (Although I thought all this was coming some time before that. I just thought the summer rally would last a bit longer than it did.) I'm trying to be realistic.
Doug
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