Paul, I don't really have a lot of factual details to support my opinion. I have talked to my friend in Hong Kong who is Japanese (also a professor of Finance) and we share the following assessment. It was clear all along that the Japanese would do the minimum possible to stave off disaster. They did nothing in fact as their situation deteriorated through the last year. Therefore, (1) the reform package adopted two weeks ago was actually a much larger action than we thought would happen. The biggest thing about it is the promise to take care of much of the bad debt saddling Japanese banks and forcing a huge credit crunch in Japan (and simultaneously the rest of Asia.) It was the fear of a systemic banking failure in Japan and the resultant depression that really had me scared about the situation in Asia. Now, coupled with the reform package is (2)Chairman Greenspan stepping up to the plate with a strong movement by the Fed to lower interest rates, which is good not only for the American economy but also for Asia, since many of their debt rates are tied to US rates. The lowering of debt rates around the world will help stimulate economic recovery everywhere. Finally, with (3) the IMF being funded, we have a guarantee of liquidity for troubled economies, which will also help in the restimulation of economies around the world.
Let me say that there is probably some more pain to be experienced by the poor folks in Asia, and there may even be some political instability as a result of it, but the ongoing Avalanche of bad news that has had markets reeling for the past year has, I think, largely come and gone. What bad news remains is probably already factored into share prices (particularly of semi-equipment stocks)and I'm willing to bet (have in fact by my positions) that the bottom is here. Now exactly WHEN the long term recovery in share prices will begin is not clear, but the relentless drop in share prices has, in my humble opinion, subsided. Current downside volatility will occasionally happen, due largely to the actions of day traders, but I think sunny skies are on the way.
hope this helps. jess. |
