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.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (1714)	10/31/2003 3:46:15 AM
From: russwinter	Read Replies (1) \| Respond to of 110194

I'd recommend Hightower Report especially for data and perspective (bullish slant on commodities). The sub is cheap, and their research library excellent. They were picking up on the China situation in corn, while most others were sleeping. The second tactic, as I mentioned, is to get positioned with the commercials ahead of the big spec funds now operating in these markets. Comes out Friday afternoon about 3:30 PM EST: commitmentsoftraders.com

To: mishedlo who wrote (1714)	10/31/2003 11:18:52 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

There is a terrific interview in the Oct. 20th Barrons with Rudolph-Riad Younes. He speaks to the same points we do here, but has an added point on China worth noting: "There are two eyes to the storm. One is the US current account deficit and how it will be reduced. The second is the inevitable slowdown in the rate of fixed investment in China. It has been growing in the mid to high teens and right now stands at almost 45% of the economy. In 2002 it was 42% of GDP. This year it is growing about 15-18%, and that is really a very high rate. If fixed investment continues at this rate it could hit 50% of GDP. In its heyday in 91, Korea's fixed investment was about 38% of GDP. That lasted for about two or three years and then went as low as 26%. In the seventies, Taiwan's fixed investment was 30% of GDP, and now it's about 17%. Korea, Taiwan, and Japan are benefiting immensely from the infrastructure buildup in China, and that may last a year or two. But once it slows up, which is inevitable, the biggest losers are going to be Taiwan and Korea. China is holowing out the manufacturing base in those countries. In the short term, it isn't showing up because although they are losing manufacturing, they are selling the Chinese capital goods. Once China stops importing much of what they now do, the pain is going to be intolerable." Contrary Investor touched upon this in their Oct. 23 piece as to related to semiconductor trends: "We believe that it is very important to realize that the rebound in worldwide chip sales that really began in early 2002 is being led entirely by demand from Asia. The following chart chronicles monthly worldwide chip sales by geographic region since the first quarter of 2002. Point-to-point, monthly sales in the America's are down. Europe is up a bit from a year and one-half ago, but not enough to justify tens of billions of dollars being added to the market caps of industry players over the last seven months. Clearly Japan and the broader Asia/Pacific region are leading the charge in terms of almost single handedly supporting the recent increase in global chip sales. And maybe it's no wonder given that many of the Asian economies have simply been on fire recently. But this begs the question, what if Asian economies turn down near term? Is this what semiconductor manufacturers are worried about in keeping their capital spending wallets firmly in their pockets at the moment? Moreover, it's pretty darn clear that what has been a big spark to Asian economic growth over the last few years has been the US consumer. Now this may sound like a real stretch, but is a real and sustainable turn in the chip business ultimately dependent on broad based US consumer spending and the willingness of the US government to tolerate a substantial and near unprecedented trade deficit going forward? Well, at least in part anyway, the data above suggest that the answer to this question may be yes. In recent weeks, a good number of sane voices have begun to express concerns about a slowing in the Chinese economy over the next year or so. Andy Xie at Morgan Stanley and Marshall Auerback at the PrudentBear site both have penned discussions this week that suggest such an outcome lies dead ahead. You'll also remember that a while back we noted that China had raised what is basically the equivalent of margin requirements in their banking system in an effort to cool down what is a currently booming economic environment. Foreign direct investment and domestic borrowing have helped fuel China's dramatic economic expansion this year. And, in turn, China has helped fuel economic advancement in the greater Asian region largely through their bursting at the seams import needs. The Olympics to be hosted by China in 2008 are now less than five years away. Although we're just guessing, it may be in China's best interests to cool their economy for a time right now and then ramp back up in the two or three years prior to the actual Olympics. From China's perspective, probably nothing would be worse than a blow-off bubble economy in the few years ahead followed by a bust into or near the Olympic timeframe. It's something to keep in mind. And just maybe, this is exactly what is on the minds of semiconductor managements these days, in addition to the thought that the US economic spark as of late is almost completely stimulus driven."