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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Terry Whitman who wrote (3459)	3/15/2001 8:17:20 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

Not ready to commit to a BK scenario quite yet, but certainly can't ignore the parallels with 1987. The economy is still strong overall, but just certain sectors are being tremendously impacted by over-capatalization. We've been so busy building the information highway, that we forgot to include enough gas stations to fuel the traffic. Thus, the energy sector should do well over the next couple of years and not face the traditional recession related fall-off. One other analogy I've seen somewhere is that we built this massively huge information superhighway with huge fiber backbones, but the on-ramps and exits are still miniscule capillaries that need to be dilated. That should be good for Cable and DSL (eventually). And then we have built this information highway primarily to accomdate the young folks driving their silicon "ferraris" with all the bells and whistles, while neglecting the "basic transportation" needs of grandma and grandpa who could never hope to grasp how to drive a MSFT Ferrari, let alone fix it. That should be a bonus to set-top box manufacturers. So I think the coming economic focus will be on consolidating the technology improvements and creating more demand. The internet certainly isn't going to go away, that's for sure. Regarding the overall economy the fact remains that if people aren't buying over-valued stocks, they will be buying consumer goods or paying off debt. And since the US is facing demographic constraints as boomers retire, the unemployment rate should remain relatively low. The biggest problem the US faces is the inability of its foreign competitors to wean themselves away from being export driven economies. Japan and Asia are a basketcase, and if Japan is forced to devalue the yen in order to monetize it's public debt, the ramifications on the rest of the would be high-powered. I'm just having a hard time trying to figure out if such an event would be negative or positive for the US. On one hand, US inflation would decline as imported goods became cheaper. But there would be cries for protectionism to protect US manufacturing jobs (which would be declining anyway due to boomer retirements). And then there's the impact on the dollar, which would likely rise, which should permit the FED to lower rates even lower to levels last seen in the 1960s, in order not to created additional upward pressure on the dollar. I really don't know how to analyze all the data coming in right now. But I'm not yet willing to say "BK!!" Regards, Ron

To: Terry Whitman who wrote (3459)	3/15/2001 10:34:55 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Terry, there seem to be some very compelling deflation forces at work globally. The VIX is no where near 50 which is the levels it worked to in 1998, this has been so much more of a controlled burn. some entertaining comments from briefing this morning on Japan: --------Morning Briefing: Surprise, surprise! We went home last night figuring the Nikkei may be at about zero by the time we came in this morning, but such has clearly not been the case. While the Nikkei plunged below the 11,500 level in early trading, it managed to close 2.6% higher, back above the 12K level. The sharp bounce was largely a function of some contrition in the banking sector, as restructuring hopes were lifted by an announcement that the UFJ group (to be created April 1 by Sanwa Bank Ltd., Tokai Bank Ltd. and Toyo Trust & Banking Co) will write down bad loans totaling more than Y1 tln. The news helped to ease the heavy carnage in the banking sector, though most of the majors still closed to the downside. Of course, the unexpected Nikkei bounce provided a much-needed lift for global equities, a dynamic that for the most part, has weighed modestly on Treasuries this morning. However, the JGB market still managed to close higher despite the enthusiasm in stocks. In fact, the June futures contract even managed to set a new historical high at Y140.01, before closing at Y139.78. The favorable tone was directly attributable to some rather friendly BoJ dynamics. Local press reports were abuzz with speculation of a return to the zero-rate policy on Monday, while talk of a quantitative easing also garnered some credibility. The Jiji news agency cited a senior BoJ official as saying that the bank could implement a "reserve targeting" through which the BoJ would target deposit balance at the bank's current accounts. Such talk has led to a dramatic run-up in dollar/yen this morning, with the pair climbing as high as Y121.74 in recent trading. Easing speculation has also been supported by comments from BoJ Gov Hayami, who told Parliament last night that the central bank would hold discussions and make "appropriate" judgments its policy board meets Monday.-------------