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

To: TobagoJack who wrote (12106)	12/25/2001 7:01:42 PM
From: elmatador	Read Replies (1) \| Respond to of 74559

The day I discovered Japan peaked: March 16, 1991. Has Japan Peaked? Japan gazers have always tried to see a signal that Japan has reached the peak. They look at changes in workforce’s in behavior; if the high Yen can break the export machine; how many TVs or cars are recalled because of defects and so on. I have also expected (we are Japan-gazers as well, aren’t we?) to see a signal that Japan have peaked. My assumption was; if I ever see a signal that Japan had peaked it would be when a manufacturing group go financial. Because western manufacturing companies that goes financial aren’t competitive in their original business. •Ford finances car loans for customers directly, often making more money on the car financing than on car manufacture. •General Motors Acceptance Corporation (GMAC) is now one of the country’s largest financial institutions...virtually as large as American Express, Metropolitan Life, or Manufacturers Hanover. GMAC contributed a quarter of 1985 GM’s $4 billion net earnings and around one-third of its 1986 profits. Davis, Stanley M., Future Perfect, Reading Mass., Addison-Wesley Publishing, Inc. 1987. By my knowledge of (Siemens) “...With liquid assets regularly exceeding DM 20 Billion (about 1% of West German GNP), Siemens is more like "a bank with sidelines in electricals" (a much resented charge) than an innovative electronics company. The Economist, Jan. 21, 1990. “Phillips&Drew calculates that the 50 largest non-financial companies in West Germany receive interest income that is equivalent to 6% of their pretax profits.” The Economist, Feb. 3, 1990. Once a company is flushed with cash its core manufacturing fades in importance. “Siemens has been forced to buy an increasing number of products, to sell under the Siemens label, from faster, more innovative manufacturers. [Siemens is an example of a European company in danger of being hollowed out,’ says Robert R. Bishop, head of Silicon Graphics Inc’s international Operations.]” BusinessWeek International, Feb. 20, 1989. Moreover companies which manage their pension funds have its policies distorted: “Siemens personal costs are 43% of sales. Two third higher than G.E.’s. Last year (1989) 40.000 people from head office were transferred to marketing and finance. By January 1990 Siemens had $12.2 billion in cash and equivalent. Mostly in German government bonds. This produced a $1.1 billion in interest income in 1989. Two third of Siemens total pretax profits of $1.6 billion. For the first half of the fiscal year of 1990, ending in Mar. 31, the company recently reported that net profit climbed 15% to $440 million. While revenue rose 16% to $17.9 billion. Higher interest rates in Germany boosted profits. German Government bonds yield sharply higher. Forbes, May 28, 1990. “...with over DM23 billion in liquid cash (half of it reserve for provision for severance pay for retirees)... Der Spiegel, 12/1988. Because of these reserves for severance pay for retirees, the company keep them in the payroll not to pay out the cash. The result is the company has lots of idle improductive people. In Munich they are called ‘wasserkopf’. Most of their time is spent from office to office attending each others 25 years jubilee. There is even one of them whose specialization is to organize such parties. Bring in the barrel of beer, serve it etc. Some who has been abroad comes back get an office, a title but nobody even asks what does he do there. “German management consultant Jochen Kiembaum notes that managers comprise 25% of the work force at electronics maker Siemens, twice the level at Bayer and three times that of Volkswagen. And with German companies still among the least computerized in Europe, Kiembaum estimates that increased automation could force out as many as 8% of the nation’s accountants and administrators over the next few years”. BusinessWeek International, Nov. 26, 1990. Now it seems that the Japanese financial engineer will take over the production engineer. “Toyota, Japan’s biggest carmaker and its wealthiest industrial company, has taken a first cautious step into financial services business. Its buying a 40% stake in Merril Lynch’s Japanese fund-management subsidiary...Known in Japan as ‘Toyota Bank’, Toyota Motor, the Japanese parent company, had ¥2.2 trillion ($16 billion) of cash at the end of December and no bank debt. Add in other group companies and the amount of cash that Toyota needs to manage exceeds ¥3 trillion...Toyota seems to have two business goals in mind . First, it would like to manage its own pension fund. This was worth ¥248 billion ( $1.8 billion) at the end of March 1990, and is growing at more than 10% a year. Such expertise could later de developed into a specialized investment-management business managing other companies pension funds, much as General Electric Credit Corporation does in America. Second, Toyota wants to build a ore general financial-services business, rather like General Motors Acceptance Corporation. The Economist Mar. 9, 1991 With my example of Siemens I want to explain that when the wealthiest Japanese industrial group goes financial it means something. Japan has finally peaked.

To: TobagoJack who wrote (12106)	12/25/2001 7:10:04 PM
From: elmatador	Read Replies (1) \| Respond to of 74559

The day I saw Asia had it coming: April 30th 1995 Bandung, April 30th 1995 Dear Andrew, Asia Has it Coming Why a bunch of OEM countries have raised so much fuss? The growth path Asia is taking will never lead their countries to the same standard of the West's industrialised countries. Asia's economic structure is still very much underdeveloped The state is present in every business. Every business has to be settled by a local front man. The sort of person who get documents rubber stamped in fast time, has the political muscle to ask the government for protection for a certain industry. This is Latin America's economy sixties vintage. China's so-called Guanxy-the contacts one has to have to get business-is no more than a Cosa Nostra type of business. The Guanxy is a Mafia controlling access to markets demanding payment to the local power brokers. This is the well known frontman which companies have to deal in Africa and Latin America. Asians, being still in a less developed stage than South Americans are naive to believe their leaders will propel them into development and work hard for it. As things presently are they still have to: • go through the stage when they discover that no matter how much their productivity increases; their standard of living is stagnant. For instance, Indonesia, regardless of more than a decade of 6% growth still have a $850 per capita income. • go through the stage when their strongman policies will be contested. • to struggle for the "openings" of their political processes. • to pass through the interim period when opportunist leaders will promise to deliver democracy and economic growth and fail • go through the period of lukewarm economic reforms as politicians changes just to keep the same. • To pay back the principal and the interest of their debts Latin America has gone through all that already. Just for comparison: Asia is behind Latin America at least 30 years. The economic growth experienced by Asia today is of the same sort Latin America experienced in the fifties and sixties. It is a growth that will not be sustained. The investment is not productive. There are deep structural adjustments that still have to be made. Asia will eventually crash as Latin America did in the eighties. But then there are the economic facts. The high growth of Asian economies. There is not any special reason for the Asian growth. There is no Asian values to account for their prosperity—regardless Asians and their boosters stress that for their own benefit. Is very simple to explain why Asian economies grew. When the European and American industries was looking for a base to replace the costly labour, regulations and energy costs, Latin America, Africa or Eastern Europe could not fit. In Latin America, then, Yankee Go Home was splattered all over the South American walls. Foreign multinationals were not welcome and American businessmen were being kidnapped. Eastern Europe was counted out because of the Cold War and Africa was too underdeveloped. American and European companies turned their eyes to Asia as a industrial base. The generation of Americans who fought in the Vietnam war knew Asian mentality. Japan joined later on. For Japan, Asia is a natural market. Their investment in Asian countries accelerated after the Yen climbed against the dollar in the mid-80s. Lets not forget the Asians working in the Middle East and sending money back to their coiuntries of origin. On top of that the developing economies of Asia only by producing the basic needs of the growing population it would be enough to account for most of the growth. Transport, housing, food production and clothing. We are observing in Asia today another propaganda campaign in the working. The same sort of well articulated publicity campaign that propelled Europe economy in the second half of 1980s. Remember the over hyped Europe 1992 talk of European Community's economic gains of 5% of European total GDP once the market would open. The real world showed a different picture of unfulfilled promises. The opening of the European market in 1992 coincided in fact with the worst recession Europe had experienced since World War II. Special interest groups are hyping Asia today as they hyped Europe 1992 in the late 1980s. Economic agents talk Asia up due to vested interests. Don't hold your breath there won't be a Pacific Century. See please the Business Week Editorial of May 1st. This type of reaction of country against its investors happened in Latin America during the late sixties. Remember also Dr. Mahatir's brushes with Australia and Britain. Asia has it coming. Best Regards Osvaldo

To: TobagoJack who wrote (12106)	12/25/2001 7:22:19 PM
From: Moominoid	Read Replies (2) \| Respond to of 74559

Just been idly thinking about Elliot Waves, oh and Kondratieff Waves too. This is what I come up with. Assuming the late 1960s and the 1970s are the last major corrective phase and then we have a bull-market since then. Wave 1 peaks out in October 1987 and the correction lasts into the 1990 recession which is wave 2. That was the accumulation cycle when today's billionaires got their start. Then starts wave 3 which runs till March 2001. It subdivides as it should into 5 subwaves. Wave i up to 1994 and wave ii the 1994 correction. Wave iii up to July 1997 and the Asian crisis. This is when the "equity culture" really gets underway. Wave iv lasts till October 1998. Then wave v when many bears capitulate and things go totally crazy and everyone gets into buying dot.com stocks. Now we are in the wave 4 correction. I suspect we are in the later stages of the B wave bear market rally and that the final bottom will be much lower. But I could be wrong and we might already be in Wave 5. In this wave all remaining bears will capitulate. Then from 2010 +/- on will be a prolonged bear market. Well this is one way of thinking about where we might be in the larger scheme of things. In my (not very popular) view the 1979-82 recession period marked the end of the Kondratieff Cycle stating in the 1930s. I believe that the Kondratieff Cycle is accelerating over time. The current one may only last 30-40 years. David