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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: IceShark who wrote (13932)	2/9/1998 9:06:00 PM
From: Zeev Hed	Read Replies (4) \| Respond to of 18056

Dan: Actually, few months back I suggested the the "overvaluation" test based on "punny" dividends, should be corrected for buy backs. The $4 Billions buy back (over the next 12 months) just announced by GM is nothing but a net 15% after tax dividends to GM stockholders (A bear market bottom rate of payment). Similar announcements since last October by IBM, MRK and I believe GE, really make the DOW, based on true after tax cash dividends, look quite cheap. As you know, my short term negativism was based not on domestic markets overvaluation arguments, but on the basis of worldwide overcapacity of producing assets, many of which (in South East Asia) where highly leveraged assets, thus in danger of not being able to provide sufficient returns to cover debt servicing needs. I think that this situation is far from being resolved, and while the technical picture of the market has improved drastically, there is still a danger of another fall. At the time, I also mentioned that Japan should step forward and act as the locomotive for the rim, and pull those economies out of their doldrums by stimulating domestic demand, which together with some capacity closing should bring back balance in the supply demand equation. The Japanese have finally listened, at least a little, and have provided some tax cuts (about 6 trillion yens, if memory serves), and an artificial support to their banking system, in the form of both increases in their version of the FDIC as well as injection of new capital into their banking system (a total effort of 30 Trillion yens). Under usual circumstances this should provide a temporary relief and hopefully a little boomlet in Japan which should help Southeast Asia. However, I am afraid that in due time (and it may take a good six weeks to twelve weeks), the cost of the recent debacle will become apparent. Recessions in Korea, Indonesia, Malaysia, possibly Thailand and the Phillipines as well, will have an impact on the Japanese banking system. I think that more than 30% of the "defaulting" loans in the region are held by Japanese banks, and a good chunk of that will be added to the non performing real estate loans on the books of the same banks. I have no idea if the 30 Trillion Yen injection will be sufficient to handle both the old problems and the new one, if it is not, then the exercise will be for naught, since the Japanese banking establishment will not start lending (and thus restart the economy in Japan rolling) those funds, but just hoard these to satisfy the new higher net assets requirement. As for the near term, it is obvious that my turnips' forecast of breaking the 7600, is not going to happen soon. As a matter of fact the technical underpinning are showing some little strength here. But those discredited turnips still do not see a runaway market just yet. Some small turnips I am watching for a sign of a stalling market are INTC breaking back under 82, AMAT under 33, CSCO under 62. That is about it. Zeev