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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Paul Berliner who wrote (2189)	10/18/1999 3:38:00 PM
From: Henry Volquardsen	Respond to of 3536

Hi Paul, I agree that Asia has probably bottomed out. In that post, however, I was thinking more of the economic aspects than asset markets. My biggest concern re Asia is that there is still a tremendous amount of excess capacity. I saw a number recently that showed Thailand at about a 57% capacity utilization. Much of the rest of Asia is in similar condition. They need strong markets to generate demand for that unused capacity. Until intra Asian demand builds up sufficiently again the US is the best prospect. If US demand falls, for whatever reason, and those cap ute levels drop lower it will continue to weigh down those economies. I don't think this translates directly into the Asian asset markets as they are pretty washed out already. But it would delay economic recovery and keep the asset markets from making a stronger recovery. I have seen some people recommending a greater allocation to Europe. I don't have a big problem with this as I think the US stays under pressure into the end of the year. As far as the long term arguements for Europe, count me as a huge sceptic. Actually I was expecting someone to call me on the fact that I barely mentioned them in yesterday's post. I just don't see Europe as a long term competitive challenge to the US. Yes it is a big market and they will be getting some big benefits from the rationalization of their currencies. But they have lots of long term negatives. They have done very little to restructure their labor laws and the cost of labor remains very high. The cost of doing business in general is high. Also there is not that much innovation coming out of Europe. In addition, call me predjudiced -g-, but any ecomomic entity that includes the French with a major policy voice is not going to be a great business environment. I have the same view towards investing in Europe as I have towards living there, its a great place to visit from time to time but I prefer to live in the US. Asia is a different story. Even with my near term concerns for the Asian economies I am much more interested in finding some good long term plays on Asian recovery. I agree that we will probably see a pretty good January effect in the US. I certainly don't expect us to have a major Y2K problem. As to the emerging markets I can't say. If you are right and they have no Y2K problem they will have a strong rally, so many people are expecting them to have problems. But I have trouble getting a handle on exactly how vulnerable they are to Y2K. It has been my concern that with the recent hit they took they have been unable to make the needed investments. But I just don't know how accurate this is. It will be interesting to watch to say the least. Henry