To: John Pitera who wrote (5858 ) 3/19/2002 8:46:55 AM From: John Pitera Read Replies (1) | Respond to March 18th-- briefing thoughts....next round of anti-deflation measures by the end of the month , we have our doubts about the nearby aggressiveness of structural reform. Prime Minister Koizumi's approval ratings continue to deteriorate , as recent scandal-related resignations on the part of Deputy Cabinet Secretary Suzuki and LDP Secretary General Kato have heightened the public's distrust of politics. As we have argued before, waning public support essentially removes the Koizumi administration's mandate for reform, particularly when considering the more traditional recovery leanings embedded in the LDP. In addition, we would not ignore the potential for complacency when considering the government's success in averting a March crisis. Further backtracking on reform has to be considered a yen negative going forward given the potential for a reversion to demand-side stimulus, as well as liquidation on the part of foreign investors who recently moved to correct underweight positions in Japanese equities.135 downgrades of US companies year to date, while upgrades have lagged markedly at just 35. According Moody's, this 4.7 to 1 ratio is the highest since the fourth quarter of 1990 . Not to be outdone, there have been 57 investment-grade downgrades this year, compared with just 8 upgrades. Of interest, this 7.1 to 1 ratio is the steepest on record. 5.50% level. As we have mentioned before, support comes into play around 5.48%, which represents last May's highs in yield on the back of premature recovery expectations. In addition, 5.48% marks the 50% retracement level of the bull market in Treasuries beginning in January of 2000 . A backup towards the 5.50% area may provide an opportunity to reconsider establishing some bullish exposure to Treasuries. While we respect the momentum behind the reflation trade, our quality recovery concerns remain largely intact. The disappointing February retail sales data, particularly in combination with recent comments from Fed Chairman Greenspan, highlights the headwinds surrounding any credible household contribution to recovery.German economy will grow by as much as 3% next year . Adds that unions must employ "reason" when bargaining for higher wages.
