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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Jerry Olson who wrote (13772)	11/8/1997 4:59:00 PM
From: IQBAL LATIF	Respond to of 50167

OJ- In 1980's I was involved with real estate development in NY and when we sold our first development with Fisher Brothers 'The Park Ave Plaza' we got cap of returns of 4.75% nearly 22 times rent which was then higher then what is today in Manhattan- the property market was far more overvalued and asset inflation overhang in 87 was much more dangerous- I agree with you about 87 crash as precursor of S&L crisis but on its own the 700 billion $ unwanted concrete jungle does not exist now, the property values are far more realistic and banks have been prudent in lending at a proper cover, for me US banks have some exposure to Latin America but even here like ASEANs we hae Brazil with a war chest of 80 billion$'s- I remember distinctively during previous global crisis we had Latin America practically bankrupt why to go too distant in the past look at Maxico the short term liabilities of Mexico were far in excess of its reserves- we presently do not have a similar situation it is crisis of confidence starting from rigid maintanence of over valued exchange rates but the basic economies remain robust. Much is talked about Japanese institutions inability to maintain Basle capital adequacy ratios I think Japanese financial institutions are in far better stuation then last time Nekkei visited 14500- in my opinion lower interest rates environment has helped capitalise Japanese institutions much beyond wildest of analysts expectations- for me this Japanese crisis is like darkness before dawn- INTC came shy of earnings by 3 cents the market took 25% off the marketn captilisation of INTC within 30 days- how many times you have seen properties values eroded overnight as a result of interest hike or any other earning surprise- the property bubble bursts as a consequence of bursting of the market bubble and hence is a consequence and not the reason of market fall- moreover it is a complicted problem it leads to longer peroids of slow down like Japan is presently entrapped in- I don't consider US markets to be a part of this global problem because no one has borrowed short money against over-inflated assets to invest in markets- if this was the case in DOW we would have already seen much higher level of redemptions- the first five percent decline is a very important indicator of future action of market it is the quality of long term retirement type funds which are still not rerady to leave the equity markets. They know it well that self correction mechanism in place in market will correct all hype and on average stocks deliver a better return then any other financial instrument. the Mutual Funds are under no pressure to sell as investors are in for long haul (401plansand pension funds) they have not borrowed short money for this long haul- I would agree with your assumptions if DOW was supported by inflated assets what I call as' hot money' in Manhattan that would have resulted in long 'bear market' as banks would pull the plug and to meet bank obligations one round of selling would invite more ferocious other rounds of selling. It is this single reason that market refuses to budge in lock stock and barrel although individual stocks not meeting market expectations are taken to cleaners, a market so concious of earnings and macro realities is not a mountain of irrational hype.