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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Steve Hegji who wrote (1501)	12/20/2000 8:08:26 AM
From: TobagoJack	Respond to of 74559

How would we design and execute a Perfect Financial Storm? I just went to Hawaii for the weekend, did swim at Kailua beach park, drinks at Dukes, dinner at Sushi Sasabune, and more drinks at Club Le Femme Nu. The world seemed fine and going on finer in the coming year. The bonds folks are energized to clean up on bonds bought now in expectation of lowering of interest rate. The real estate folks are excited about yet another year of rising home value in wake of expected lowering of interest rate. The home owners are giddy about having survived the NASDAQ fall, and going for yet another tranche of home equity refinancing to take money out to finance stock purchases or maintenance of existing positions. The stock folks are relieved that their shares will fall no more now that Al Green has made them a promise, so that they do not have to liquidate their shares in order to pay down their home equity loans. These were my observations on the Friday. Thus relieved, I spent Saturday and Sunday for beach fun and living room Quake Deathmatches. Life took on a more serious note after I got on the plane for Tokyo on Monday. I tried to figure out why the whole world seems to be fixated on interest rate. I failed, concluding that the world simply prefers to focus on a “causal singularity” for convenience sake. I then proceed to map out the design and execution sequence of a Perfect Financial Storm. We need (1) multiple storm fronts (2) converging in time and space (3) against unprepared and weakened human participants (4) lacking effective leadership (5) far away from any help Possible storm front #1: Banking crisis (i.e. JP Morgan, BoA, MSDW?) Possible storm front #2: Currency crisis (i.e. will the dollar stay high?) Possible storm front #3: Debt crisis (i.e. consumers, telcos?) Exacerbated by wind chill factor of unsupportable valuations measured against hokey accounting (CSCO, LU, LH, AMZN?), accompanied by generally high valuations (KO, G, PG?) and heat source shortage of high energy costs (gas, oil). Converging in time of 2001 and in space of USA, now that Asia (incl. Japan) and Europe has been taken out of the locomotive category and are acting as heavily weighed down cabooses. Against human participants who are individually leveraged (unlike in Asia and Europe) and who no longer understand the meaning of recession, and many of these individuals are looking to retire to the beach life soon. On leadership, it remains to be seen whether Bush and the Congress can work together, and work right together. It seems a lot to ask of a bunch of lawyers and politicians, elected or not. It took Thailand but a few months to lose what was accumulated in 10 years. Returning the NASDAQ to 1990 cannot take more than a couple of years if true world leader Greenspan really tried. On help, no one is big enough to help the US, as the US was able to help Mexico. I am not trying to figure out how to benefit from a financial crisis, as any truly effective bets placed exposes me to dangers of timing. I am only trying to figure out how to keep what I already have through such a crisis. I have a certain amount of trust in the dollar, but not unlimited. I still believe in my financial institutions, but suspicious nonetheless. I find gold barbaric but strangely attractive, and I certainly find stocks disagreeable to the extreme. When the storm hits, even the prepared may react in unprepared ways and panic right along side the Al Greenspan personality cult faithfuls.

To: Steve Hegji who wrote (1501)	12/20/2000 8:25:50 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 74559

Excellent post! I believe that Americans should be better savers and I've taught my children that and try to influence my friends to do the same I have been in a cash-heavy position for some months now, after betting heavily on momo stocks. So I guess that makes me a "saver" by default. However, I don't think my savings are a very productive use of capital for the economy as a whole. OTOH, it seems that the economy has been wasting too much capital these past few years (i.e., the asset bubble induced by the credit bubble), so perhaps capital preservation in such times can be deemed "constructive" in a way. But look at Japan, that famous Nation of Savers. They have like $12 trillion in savings accounts at their post offices and such (the post offices are allowed to offer slightly better interest rates, I believe, but it is on the order of 1% after taxes). I know Japanese people around my age (34) whose entire "retirement plan" these past ten years has been to save as much as they can and let it build up in the bank. Never mind that the money is gaining 1% nominally, and declining in real terms. That is the plan, which seems unrealistic to me, unless you make a whole lotta money or plan to retire at age 80. While the US market has become bloated due to speculative excess, I think what the Japanese have done is perhaps even worse. All that money collecting dust and nobody doing anything productive with it. I know the Japanese have many other problems with the capital structure of their banks and such, but I do think part of the problem is a lack of interest in risk investment of any sort on the part of the individual, coupled with insufficient means for channeling such capital to productive ventures (e.g., venture capital, and the requisite exit strategy [read "IPO"] for such risk capital). I really don't mind if the Naz goes down to 500 (I will be happy and go bargain hunting). My greater concern is if we lose faith in the basic investing process in this country, whereby entrepreneurs with innovative ideas can find financing and bring those ideas to market. This is really a key element in the long term, despite all the obvious bubblemania and clowns that need to be taken to the woodshed. Just some thoughts. Cheers, MM