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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: George Mc Geary who wrote (18705)	6/26/1998 7:29:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

George-- Markets have always a tendency to overshoot, I remember clearly couple of years back when $ was being ditched for Yen and we had seen this so-called scenario of death of $. But we are right now exactly in a situation which is opposite to what it was when Yen traded 75 to a dollar. Yen strength was overdone at that level and now that Yen has weakened to 142 it is well outside the limits which can be termed as good for US exports or global trade. Japan did close above my 15200 level which was my first resistance on top also HSI rebounded and closed above that critical resistance. Yen I can see is hovering around those interventionist levels. This time Rubin is going to trap a lot of people as I doubt he would throw another 6 billion $ in the speculators den. He will let it run to 149 -151 area and then intervene big, to trap these greedy breed of market speculators you always do something unusual. You need a major resistance to be taken out' and a close above it in the 'Vatican of currency markets' that is NY. I can see this on the cards but knowing it well I extend my radar a little further out and can see that the blocks of improving corporate profits in Japan are being placed slowly and steadily. The background, on which the big move I expect in Japan will come, is being developed. Ofcourse if preceding is the strategy we will see some further rattling of ASEAN supports. This capability of markets to correct macro-economic imbalances through 'fast forwards and fast reverses' is inherently unstable. This 'undefined movements' is the reason why we are unable to describe markets by charts, because what chartists fail to realise is the fact that what they are seeing, everyone else is also watching the same data. The world is not going to end it never does by fall of markets. The Japanese companies, I remember, were competitive enough to survive and make profits at 75 Yen to a $, imagine where is that huge profit going since last few months when Yen is trading from 110 to 142. In my opinion the hidden losses and provisions of companies will be wiped out as market serves in platter to Japanese ailing industry a graceful way through Yen weakness. Also like early 90's low interest rates helped US the Japanese banks are being helped low interest rate to slow down accumulation of new interest on mountain of non-performing debt, the profits are being ploughed back to restructure the capital base. In short these extreme actions of markets if anything else are 'automatic stabilisers' of market. In absence of these shocks we may see much longer periods of sustained drops. The 'shock treatment of markets' corrects what otherwise look like a long drawn out process of structural reforms. It is the threat of meltdown of 'global financial system' as contagion of yen weakness raised alarms in China and ASEA that prodded otherwise unmoved Japanese to proceed with their bad debt problem. Yen at 142 certainly has helped alleviation of the problem. I may say that 151 is possible but I can also firmly establish that a year from now we may look back at this period and say what a time to buy yen against $'s. I still think that my levels of 8910 have relevance, you can see it on the charts like the next resistance at 8060 or 1891 or 1866. I will look for that test of 1130 area in next few sessions but I hope we will be able to test that support successfully. In case of failure I will buy some 1100 puts on SPU. Since last week, may be market was over pessimistic about prospects of Chinese devaluation. Once that is kind of out of way and we have seen China stabilising and Russia reaching an agreement with IMF and was able to sell 3 billion roubles bonds easily. The perception that new round of selling will lead to softer corporate profits have now been discounted. However, market are like river wild that tends to change course, we as amateur watchers on the banks can only try to interpret what our limited visibility permits.