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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Jess Beltz who wrote (5014)	3/19/1998 9:27:00 AM
From: Ron Bower	Respond to of 10921

Jess, Thank you for an excellent and informative post. It's one of the best explanations I've seen on Japan's problems. You apologized for it being too long, but I was disappointed that it ended. I began putting monies into high growth, debt free, cash strong, exclusively NASDAQ traded Hong Kong companies with manufacturing in China when the region crashed. I would appreciate a similar post on the situation for HK/China. Thanx, Ron

To: Jess Beltz who wrote (5014)	3/19/1998 10:36:00 AM
From: Ramsey Su	Respond to of 10921

Jess, a lot of attention on the potential devaluation of the RMB. What do you see as the reason for the YEN not tumbling? Ramsey

To: Jess Beltz who wrote (5014)	3/19/1998 11:20:00 AM
From: Robert Douglas	Read Replies (3) \| Respond to of 10921

Mason, Clark, Ramsey, Jess, Thanks for your thoughtful responses to my original post on Japan. Clearly there are many problems faced by this very important country, important for the region, the world and for the semiconductor capital equipment market, which is our reason for being on this thread. The legion of problems faced by Japan have received much attention in the press, making it seem very unlikely that a solution exists. I have tried to draw a parallel to the situation once faced in this country both from an economic view and a market view. It is this last point I wish to focus on here. Since the title of this thread includes the old saw about blood running in the streets, my question would be to each of you, has the market discounted all this bad news already? That's the whole point of the "bloody streets" method of investing isn't it? As I mentioned in my original post, I was brave enough, or foolhardy perhaps, to buy US bank stocks when the blood was running in the early 90s. I clearly remember at that time how that situation seemed to be hopeless as well. The very day I was buying these stocks, the Merrill Lynch analyst appeared on TV saying the group was headed 30% lower. The whole point of a discounting mechanism like the market is that future expectations are factored in. But we are talking semi-equip stocks here. A capital goods industry that sells equipment to another producer of capital goods. How much more cyclical could you get? By nature the swings in this industry are bound to be violent, and its' history backs that up. Right now things are pretty bloody but I see two positives that I would like to see discussed. Let me throw them out to this group for critique. First. Money, that is lending in this case, is fungible. If the lending doesn't come from the money center banks of Tokyo why can't it come from New York, or London, or some other place? If a semiconductor maker in Asia needs a loan to buy a stepper, why does it need to borrow from an Asian lender? If the loan makes economic sense (and this is what I think we should focus on) won't a lender somewhere else step up to the plate? Second. If Asian semiconductor makers are lousy credit risks won't others step in to fill their shoes? I think we have precedence for this when Japan lost a chunk of the DRAM market to the very firms that are now in trouble. Once again, if final demand is there the equipment will be purchased by someone and the money lent by someone. So what will final demand for semiconductors be? If it is bad, then avoid the equipment stocks. If it is good and capacity gets used up you will see a classic dearth, glut cycle and the corresponding boom in stock prices. I recognize that these are longer term issues and some ugly holes in demand for equipment could occur, but wouldn't this just make the catch up buying later on greater? I am new to this thread and apologize if this has been resolved earlier. If not I think the issues of final demand, capacity utilization along with replacement cycles are the critical factors in making an investment in these companies. Let me thank you in advance for your willingness to share each of your varied expertise.

To: Jess Beltz who wrote (5014)	3/19/1998 11:47:00 AM
From: Sam	Read Replies (1) \| Respond to of 10921

Jess, One of many great posts. You have been "bookmarked." One addition to your list. Lester Thurow had an article on the "Asian Mess" in the New York Review of Books a few weeks ago. He suggested there that one of the root causes of this whole thing is that the Asian countries all adopted the Japanese model of export driven economies as the Road to Riches. They did not build up their own internal economies, and have a rational economy based on their own needs. Rather (and here I am extrapolating a little, I think), they were frequently more focused on building a few huge fortunes for the power elite, selling this idea to the masses with Republican "trickle down" promises. This worked for Japan, as they were the first, and built up their financial wealth with their enormous trading surpluses. It even worked for awhile for the others. But it can't possibly work for everyone in the long run, as the markets that they are exporting to can't possibly soak up so many exports. Of course, there are differences between the countries and the extent to which each of them did this. Singapore and India have deeper internal markets; Indonesia is at the other extreme. And of course it gets more complicated since, for example, Japan didn't finance their expansion to same degree with debt that say, Korea and Indonesia did. But the general idea, I think, holds. And it means, I think, that unless they change their whole economic and political philosophy, they will continue to have problems, and will possibly export those problems to the rest of us, especially if we continue to think that we can bail them out by continuing to lend them more money so that they can keep their economies afloat by exporting more. This, if taken too far, will in the end just export deflation to the rest of the world, with Big Kahuna consequences. The countries that are in the deepest trouble were all trying to get rich the "quick" way, without building their own internal market infrastructures (I mean "market" here in a very broad sense, not just financial). Thurow also suggested that the real problems for the world and US economies may come if the EMU becomes a reality, and if it is accepted as an alternative to the US$ as a reserve currency; then the dollar gets hit, and the dire consequences of the US trade imbalances will come home to roost.

To: Jess Beltz who wrote (5014)	3/19/1998 3:31:00 PM
From: Thomas DeGagne	Read Replies (1) \| Respond to of 10921

Excellent post Jess. I have read many of your previous posts but this one had the most "meat" in it. >By contrast, in Japan, the problems are across the entire banking >sector. There will be no domestic Resolution Trust type cure for the >problem without the participation of foreign (particularly American) >banks, because there are not enough healthy banks left in Japan. I would agree that the Japanese government is unlikely to close down and liquidate the assets of most financial institutions in the country. It would be a Tsunami(?) for asset values in Japan and result in a vicious circle of credit contraction. I believe it is more likely that Japan will slowly shut down the worst performing banks. This should allow a more orderly transfer of performing assets to stronger institutions and improve their balance sheets. Survival of the fittest and biggest banks. This process has already begun with the closure of several banks and the Yamaguchi(?) brokerage last year. What is your opinion of this scenario? PS: Have you read The Alchemy of Finance by George Soros? It has an interesting discussion and theory on credit expansion and contraction cycles.