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

To: hugh thorne who wrote (4549)	8/31/2001 8:44:35 AM
From: hugh thorne	Read Replies (1) \| Respond to of 33421

If anyone has data on the average floating rate interest expense burden of the US business sector, we could very quickly estimate the positive impact on earnings from the 30% or so reduction in carrying costs for the next 12 months or so. I would guess that it could be as much as a 3% rollover increase assuming significant amounts float.

To: hugh thorne who wrote (4549)	8/31/2001 8:55:49 AM
From: John Pitera	Read Replies (2) \| Respond to of 33421

Also the problem is that there have been capital losses on investments in real estate, equities, and corporate debt in Japan. As we've seen in the US stock Market one could get a 1% interest loan to buy JNPR, but if JNPR falls from 240 to 15, you've still got a big problem paying off that loan.

To: hugh thorne who wrote (4549)	8/31/2001 10:30:02 AM
From: Yorikke	Respond to of 33421

US banks are just starting to experience the problems of bad loans. The recent flurry of sub prime concern is a very clear indicator that they are likely facing a situation like the Japanese financial system. Japanese banks have managed to hide much of their problem through the interrelations between lender and lendee. Here in the US the tool of choice has been the creation of paper. Potentially bad debt has been packaged and repacked so many times that it will be very difficult for the final holder to evaluate real risk. In all likelihood these paper pushing techniques will be quite effective for some time, and like the Japanese system, the hammer may not fall for many years after the initial cracks appear in the system. It is interesting that the IMF wants to inject more money into the system. With the denial of the problem so systemic in the Japanese financial system it is unlikely that additional liquidity will do anything more than permit continued avoidance of the facts. Like the Japanese government, the IMF appears to be unable to come up with any viable solution, so they have merely used their 'last tool' of choice: bury the problem in cash. The financial world increasingly appears to be skating a thin crust of liquidity over a vast sea of bad debt. They are to busy listening to their wonderful speeches to hear the popping sounds.