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To: Glenn D. Rudolph who wrote (68485)	7/20/1999 9:09:00 PM
From: GST	Read Replies (2) \| Respond to of 164684

Glenn -- the dollar/yen intervention suggests a strong desire by market players to move money into Japan and out of the US. The idea is simply that it is time to buy Japan. China is more the wild, wild card. If China slows down, and it appears that it might be doing so, they face enormous internal pressures from domestic unemployment at a time when they are trying to restructure the state-owned sector, throwing tens of millions out of work. This is the point where China might again look at devaluing -- that is one hell of a wild card. On top of this, there is the increasing tensions between Taiwan and the mainland -- not to be underestimated as a nationalistic rallying point if the economy is on the ropes. No wholesale invasion is expected -- but there are some islands near Taiwan which China could seize to literally start breathing down Taiwan's neck. That could kick a leg off the stock market's stool -- a day twice as bad as today's my friend -- but one I think is more than a week or two away at least.

To: Glenn D. Rudolph who wrote (68485)	7/20/1999 9:16:00 PM
From: GST	Read Replies (1) \| Respond to of 164684

Glenn -- there is one other point I meant to mention: The trade deficit is not widely understood and so the spike today is not factored into most people's understanding. A trade deficit must be 'serviced' -- meaning that the country that runs the deficit must attract foreign investment to offset the trade deficit. Failing to do this means a falling currency, which in this case is the dollar. A falling dollar means we cannot import deflation. If dollar/yen intervention does not work -- and it won't -- then we will see higher interest rates at some point despite the 'tame' inflation numbers. And the inflation numbers will get less tame as prices in dollars go up. The market is not on solid ground and the trade deficit and yen intervention overnight suggests the beginning of a bad trend is at hand.