To: Sergio H who wrote (6446 ) 10/27/1997 8:35:00 PM From: Zeev Hed Read Replies (1) | Respond to
Sergio: I think that any rally here (and only later in the week) will be a dead cat bounce. My fear is that the Japanese market is going to collapse severly (and I mean break 14,000 and possibly make a new bear market low), and that will cause our own interest rates to increase as I will attempt to explain below. Why? The overcapacity that has been built up in high technology as well as in basic industry in the pacific rim is now going to be supported by even lower wages as country after country are goping to devalue their currencies to prevent the flight od capital that is plaguing them. The Japanese banks faced with additional losses to the real estate losses they still have on the books from the bubble will have to reliquify by selling, you guessed, US treasuries of which they have a bundle. Result higher interest rates here (and word wide, when we need them the least. The combination of rising interest rates and deflationary pressures (because of the capacity oversupply) will be murderous. I would not be surprised to see the market another 1000 points lower by the end of the year (my next line in the sand at 6200 <VBG>.)
