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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (2847)	4/3/1998 9:06:00 AM
From: Tobias Ekman	Read Replies (1) \| Respond to of 9980

Korea down 4 %. Thailand down two percent. I guess the free money of Japan did not go there . Do You think this downtrend is related to Japans ?? Thankyou

To: Worswick who wrote (2847)	4/3/1998 4:53:00 PM
From: Lazarus_Long	Respond to of 9980

<< we now have US$ 10 trillion in funds suddenly available for mutual fund purchases in the US and Europe. >> Can that number be right? That's larger than the US GDP!

To: Worswick who wrote (2847)	4/4/1998 10:10:00 AM
From: Tommaso	Read Replies (2) \| Respond to of 9980

Are those assets really there? "Just when we thought we knew what was happening and I could sketch out some scenarios that seemed to work... we now have US$ 10 trillion in funds suddenly available for mutual fund purchases in the US and Europe." Whatever the amount--it must be huge--what form are these assets--how does it break down? You say that these are returning about 1%, so you clearly mean bonds and deposits denominated in Japanese currency. If you mean savings deposits in Yen, then these could be withdrawn, converted to spendable deposits, and used to purchase things denominated in other currencies. To do that, the yen would have to be exchanged for other currencies because the money would have to flow into accounts in banks in those other countries. I would think that a great increase in Yen being converted into those currencies would mean that exchange rates would change so as to devalue the Yen. Too many Yen chasing too little other currencies. As you suggest, the Japanese might wish to use these Yen to purchase financial assets rather than goods. They have already learned their lesson with real estate. So it does seem possible that some substantial amount might flow into the already bloated U. S. and European stock markets. Maybe they might buy yet more U.S. treasuries. Back to the starting point--though--the liquidation of savings in Yen. Up to this point I was talking about savings accounts--in whatever institutions and whatever form--that (perhaps with some delays and restrictions) can be converted directly into spendable currency. How much of that huge amount you mention is in longer- term (five years or more) Japanese government debt? Any of that debt that got converted into spendable Yen would have to be sold to another buyer. Such selling would cut the value of the bonds and drive up interest rates. As interest rates went up those bonds would become more desirable to hold rather than to sell. So that would seem to be a self-limiting source of funds. Actually the interest rates could rise rather quickly if there were a major movement to get out of bonds. So the question is, of that huge amount of money you mention, how much is bank deposits and how much is in longer-term government bonds denominated in Yen? In any case, the release of as little as fifty billion dollars worth of Yen for investment in the U. S. stock market could push that market on up even further. [A parenthetical and not well-considered series of thoughts: I wonder what would happen if the Japanese went on a gold-buying spree. I wonder what Moody's would say of the value of Japanese government debt if it were backed by large gold reserves. For Moody's to downgrade that debt, which is backed by huge foreign currnecy reserves, seems to be passing judgment on the value of those other currencies.] One other possibility is that Moody's and the chairman of the Sony corporation are correct and that a large proportion of what seem to be assets in Japan are in fact phantoms on accounting practices that are still covering up the speculative excesses of the later 1980s. The Japanese do have the power to throw American securities markets into confusion and collapse. By selling large amounts of U. S. treasuries, they could instantly force up long-term interest rates in the U. S. The bond market could drop very fast by 25% if rates simply went back from 6% to 7.5%. Americans would pull money out of the stock market to get that kind of return. And the stock market would drop a lot more than the bond market if that occurred. Of course, if they were perceived as having caused such a thing, who knows what kind of measures the U. S. government might take. No one seems to have noticed that the threat of seizing Japanese ships--some time last year--is what at other times and in other places would have been called a threat of an act of war.

To: Worswick who wrote (2847)	4/4/1998 5:02:00 PM
From: Michael Sphar	Read Replies (1) \| Respond to of 9980

Worswick, << What will now happen? Dow at 10,000 surely, 15,000, 20,000??? My head spins from the three dimensional chess I am playing. Every time I have bet against the US market...no kidding, from 1,300 upwards I have been wrong Tommaso. Wrong. Wrong. Wrong. I have hedged, shorted, taken contrary bets... been in gold, gold mines, commodities, etc. I've done everything goddamn thing a human mind can think of to take a contrary position against this market in the US. Against say GE, say, I have lost lots of money. Against my position Merck, and GE gone up 10X since '82. I feel like an absolute idiot. I am an idiot. I should now put my money in Nations Bank stock and just sit back and read poetry. >> Hmmmm, You will post here when you finally do go long the DOW won't you ?