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

To: Worswick who wrote (2909)	4/5/1998 3:26:00 PM
From: Tommaso	Read Replies (1) \| Respond to of 9980

Thanks for the very specific and interesting attention to these questions. I am learning a lot more a lot faster than I could any other way. It does sound as if we need not fear an immediate flood of Japanese private savings into the United States stock market. But as you point out, they could indirectly support the market by pushing down interest rates, if some part of the savings went into yet more U. S. treasuries. But as we know from what happened in the U.S. (and elsewhere) in the Great Depression and in Japan over the last nine years, low interest rates can perfectly well coexist with collapsing stock markets. As long as inflation (or the perception of inflation) stays at less than 2%, a bond yield of 4% could look awfully good in comparison to a negative yield of 25% or more on stocks, especially if the dollar is holding up agaisnt other currencies at the same time. I have not mentioned this for a while, but about ten years ago I wrote a computer program in a threaded language, in which I attempted to introduce every variant I could think of together with its effect on other variants: interest rates, stock prices, gold price, rate of inflation, tax rates, currency rates, and so on. When I tried to use it to predict likely outcomes, I could not get consistent results. At the time I thought it was my amateurishness as a programmer. I have since decided that the program was correct: these interractions are too complex to predict. Though who knows what one could do using a supercomputer and a team of really sophisticated econometrics specialists. Is any such project under way? It seems comparable to me to predicting the weather--except harder. "If winter comes, can spring be far behind" may be true of the seasons, but not of the Japanese stock market.