Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Steve who wrote (49032)	2/17/2001 2:26:57 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 77400

Discount rate prior to 1929 peak was 6%. Lowered eight times thereafter to 1 1/2% as MARKET PLUNGED. Then raised to 3 1/2% and lowered to 2 1/2%. Here is a great chart showing the rate changes juxtaposed to the DOW elliottwave.com I think you have to register to see it.

To: Steve who wrote (49032)	2/17/2001 2:40:37 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 77400

re: Japan, you are missing the forest for the trees. Each situation is unique. Their bubble was tied up more with cross-holdings and using inflated land prices in place of cash flows as loan securitization, in an ever-escalating episode of Ponzi Finance. Works great till it no longer works. Our bubble is based on massive credit expansion for TMT investment, with similar Ponzi Finance of telcos and dotcoms fueling unsustainable capital expenditures. Similar to Japan, much malinvestment. In japan, that might be a billion-dollar project to mine a mountain tunnel between two villages with population of 3000. In US, that might be 3 billion flushed down toilet of some useless dotcom co, multiplied by many such instances. These cos., which have no economic right to exist, use their fulsome purses to grow demand for capex. Equipment makers expand capacity and excite equity investors. Rising prices excites more money into game, leading to more capex and more capacity expansion ad infinitum. Again, works as long as it works, then don't work no more. That is the epitaph of all Ponzi Finance bubbles.

To: Steve who wrote (49032)	2/17/2001 2:47:09 PM
From: Wyätt Gwyön	Respond to of 77400

If you do that I think you will find that the Japanese financial system is inflexible and incapable of change and still has not dealt with worthless assets on the books of the banks. In the US such assets must be written down and the loss taken and if insolvency looms the bank will be liquidated or merged into a solvent bank Here you implicitly acknowledge that we have a bubble here in the US, but your argument is that we are better at unwinding our bubbles than the Japanese. I love it when Americans think they're smarter than the Japanese.

To: Steve who wrote (49032)	2/17/2001 3:54:09 PM
From: Razorbak	Read Replies (2) \| Respond to of 77400

O/T - Economic Comparison, USA vs. Japan "Greenspan's No Mieno" Paul L. Kasriel Head of Economist Research The Northern Trust Company February 9, 2001 There's a lot of speculative talk these days that the US may be entering a similar kind of economic swamp that Japan entered 11 years ago. I wouldn't deny that the "initial conditions" look similar - high degrees of private sector indebtedness, government surpluses, stock market bust, manufacturing recession and rising inflation. So why shouldn't the US suffer the same economic fate as that of Japan? Because Greenspan, the head of the Fed, is no Mieno, the head of the Bank of Japan (BOJ) back in 1990. Let's go to the charts. Plotted in Chart 1 below is the BOJ's official discount rate (ODR) and the Nikkei 225 stock market average for the 1988-92 period. Notice that although the Nikkei peaked in November 1989, Mr. Mieno continued to raise the ODR after the Nikkei's peak. In fact, Mieno raised the ODR a cumulative 225 basis points between December 1989 and August 1990. Talk about beating a dead horse! Chart 1 ntrs.com Source: Financial Times, The Bank of Japan/Haver Analytics It seems as though Mr. Greenspan "went to school" on Mr. Mieno's policy. As shown in Chart 2, US stock market capitalization peaked in August of this past year. The Fed had stopped raising its policy rate back in mid May, well before the peak in market cap. Also, in contrast to the Bank of Japan, the Fed already has dropped its policy rate by 100 basis points. Chart 2 ntrs.com So, Mr. Greenspan is not going to make the same mistake as did Mr. Mieno - to keep tightening after the stock market asset price bubble has been burst. But I wonder if he is going to make a different mistake - to ease aggressively before inflation has been whipped. Perhaps this is why Mr. Mieno kept raising the ODR - to keep from making this mistake. As can be seen in Chart 3, Japanese consumer inflation did not peak until the end of 1990. Chart 3 ntrs.com Source: Statistics Bureau, The Bank of Japan/Haver Analytics Although the year-over-year percent change in US CPI inflation appears to have peaked in the first half of 2000, as shown in Chart 4, it is not clear to me, that its back has been broken. Inflation this year is likely to be less than it was last year, but an overly aggressive Fed this year could provide the fuel for another pickup in inflation next year. When the Fed no longer has the luxury of printing money at will is when we have start worrying about the US economy following in the footsteps of Japan's. Chart 4 ntrs.com Source: Bureau of Labor Statistics/Haver Analytics Paul L. Kasriel Head of Economist Research ------ The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions. ntrs.com