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

To: Mason Barge who wrote (6156)	7/3/1998 8:31:00 PM
From: Ramsey Su	Read Replies (4) \| Respond to of 10921

Mason, I have delayed in responding to your excellent post on the banks and loans situation in Japan because I have not really come to any conclusions. The following may raise more questions than answers. First, we have to acknowledge that the bad debt problem is far more extensive than the US S&L crisis. It is not only S&L but also commercial banks and toss in international banking. Not much attention has been paid to Indonesia in recent weeks. I read that one audit (I think it was by the IMF) revealed far worse numbers for an Indonesian bank that previously thought. I am willing to bet that Japan's bad debt problem is far worse that the $500 billion number. But wait a minute. We have been talking bad debt but how about bad assets? How much does each of these banks have in their books which may be grossly inflated? Stocks that have dropped in half? Real estate valued at purchase price? You mentioned a "bank run". I suspect that it has already started. Not many people have heard of "Big Bang" and I don't think that the US press covered it much. The one portion of the Big Bang which may prove very interesting is the avenue for ordinary Japanese citizens to invest in foreign instruments for the first time. Just imagine if the yen starts heading south, the artificial barrier keeping the Japanese in yen is now gone. The rush is on. Not a rush to cash in the traditional sense but a rush from yen to dollars with the same net effect. As for the banking system itself, I am beginning to think that the banking system is just the scapegoat. Yes, it is a system lacking transparency, checks and balances, disclosures etc etc but what is the root of the problem? It is simply a case of too much money having no where to go. Just think for a moment. Would a more transparent banking system with all the US style bells and whistles prevented funding those foreign loans to Indonesia, Malaysia etc? Would it have prevented financing domestic real estate at grossly inflated but not fraudulent prices, for there were real transactions at those prices? Would it have prevented them from making stupid purchases like the Rockerfeller Center and over priced hotels in Hawaii? May be there were loans made to somebody's boss's brother-in-law but so what? Is the loan any better if it was made to a stranger? I suspect that a lot of these loans are of the "favor" category vs outright "theft" as the case may be from the Bob Suharto controlled banks to the Susie Suharto companies. The US went through all the changes but we still have the same risk. All it takes is for real estate to appreciate rapidly and drops 20 to 30% (the amount of the borrowers' equity) and we will have another crisis again. Japan has bigger problems. Lets go back to the US S&L crisis for a moment. All the projects that the taxpayers bailed out remained on home soil. The crisis was basically an one time tax that financed economic infrastructure which eventually benefited US companies. A lot of yen are tied up in half finished projects or empty buildings on foreign land. They are now faced with a fish or cut bait dilema that I sure would hate to be in. The entire Asian political landscape is changing. What role is Japan going to play in the future? Like I said earlier, there are far more questions than answers. Unfortunately, I don't see any quick solutions. Further more, I don't see the semi conductor industry as an answer to any of Asia's problems. Bridges, highways, airports, heavy labor intensive industries are needed to cope to with massive unemployment in every country. How many bodies does a billion dollar fab employ versus a billion dollar bridge? Comments? Ramsey