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To: Simon who wrote (9053)	11/23/1997 2:09:00 AM
From: Rational	Read Replies (2) \| Respond to of 18056

To all: Another important source of selling pressure Most Korean and Japanese banks have lost their capital because their investments in high-tech companies/real estates have gone sour. The Central banks in these countries have capital adequacy standards that the banks must meet. In fact, to operate internationally, all banks must meet BIS capital standards. The only ways to improve capital ratios is to cut loans by which the capita/(capital+loans) ratio will go up or to infuse more new capital. Given that capital has gotten wiped out everywhere, new capital infusion is not an option especially in Korea. Thus, banks have no option other than cutting loans. This will force banks to seek payoffs from borrowers; they have fine prints in lending terms to do so. There is also another ratio, the capital/risk-weighted assets that must be met. Without going to details, this ratio can be increased by cutting risky loans. Thus, loans that have not defaulted are the easier targets for banks to quickly improve their capital ratios. When borrowing companies have to payoff, they have to liquidate their most liquid assets that have performed well. A lot of these Japanese and Korean companies have borrowed heavily and invested in US stocks, which they will have to sell because selling depressed domestic stocks will fetch little. I discovered this point by looking closely at YHOO. One of its investors is Softbank with a debt of $5 bil US; the leverage is 3:1, which is very high compared to the US average leverage of 1:1. Softbank has invested in YHOO (33%, i.e., 33% of a market cap of $2.6 bil; they must have bought it at lower price). Here is an excerpt for Softbank: The future of FastParts, an online trading exchange for electronic parts, remains precarious, however, as do the fates of many of the 60-plus other technology companies in which Softbank has invested a combined $350 million. A couple of Softbank's investments are already bankrupt, and the company carries dangerous debt risks. But that doesn't stop Softbank's CEO, multibillionaire Masayoshi Son, from projecting that he will invest in 1,000 Internet companies over the next decade. So, on paper, Softbank must have done well with respect to its YHOO investment because of a huge appreciation in the price of this stock. But, when Softbank's lender forces Softbank to pay off the loans, it will (IMO) be forced to liquidate YHOO. But, YHOO will instantly drop 50%. Why? YHOO's market cap is $2.6 bil. Even at a modest interest rate of 6%, this investment can guarantee an annual pure profits of $156 mil. But, YHOO is generating $200,000 (first 6 months). Oops! Any block-selling will depress the price instantly. YHOO will still survive and do well but at a market cap reflective of its real income. Many such companies will (IMO) be forced to liquidate as a result of pressure from their creditors who are going to be pressurized by their CBs to improve capital ratios. Fact: US went into a recession in 1989-90 because US banks were forced to cut their loan portfolios (called capital crunch). The difference between US banks and Japanese/Korean banks is that the latter have lent to companies that have bought US stocks which must now be sold, IMO. Sankar

To: Simon who wrote (9053)	11/23/1997 4:35:00 AM
From: Dwight E. Karlsen	Read Replies (4) \| Respond to of 18056

Simon, I made 93% and 73% profit on two call trades which I opened and closed within one week ending last Thursday. How much did you make? -GG- Keep in mind that, even though Bears think they are somehow exempt, you are just as greedy and emotional about your short positions as Bulls are about their long positions. The market went from 7700 to 7400. Did you cover? I read alot on this thread, and when the market was last at 7400, this thread was one big cheerlead, it's just that you were cheering the market down. For some reason you feel it's okay to cheerlead if you're a Bear, but it's not okay if you're a Bull. I cheer when I make money. DK