To: Clarksterh who wrote (6193 ) 7/5/1998 12:24:00 PM From: Ramsey Su Read Replies (2) | Respond to
Clark, Zeev, Jacob, Doug and all,The Bridge Bank. This is a buy-time strategy. At $30Y trillion, it is grossly underfunded. The only accomplishment is the allocation of $17Y trillion from the government to protect depositors, hopefully preventing bank runs by the small depositors. I believe the limit per acct (kind of like the FDIC $100K limit here) is something like $10Y million or ~US$71,000. This could well be one of the reasons why banks cannot be allowed to fail. Who knows how many accounts are above this limit, especially business accts. Permanent Tax Cut. This is too little too late. I don't think there is one Japanese alive who does not know they are heading for some tough times. Though necessary, a tax cut will only serve as a decelerator to the drop of consumer sentiments, not a stimulant to increase consumer spending.The YEN. It is going down, the question is by how much. The only pressure to push up the yen is the trade deficit with the US and the ballooning current account. I don't think this is enough to offset the demand for green backs. With the Big Bang in place, the Japanese has both the incentive and the channels to divest at least some of their savings to foreign denominated instruments, be it the USD or upcoming EU. Depending on the extent, the Yen may or may not trigger another round of devaluation. Of major concern are obviously the RMB and the related HK peg. I suspect that China has already made the decision to devaluate, if the Yen hits a certain target.The Asian Economies. The countries that rapidly privatize and encourage foreign investments are going to have an infusion of badly needed cash. They should recover first at the expense of possibly giving up sovereign control of their businesses. Many countries view this as economic colonialism and will fight the western "invasion" at all cost. Without Japan and possibly China, none of these economies add up to much anyway. All they can do is sit and look east, hoping the rising sun will indeed rise to their rescue again.The US Economy. Without Asia, it is unlikely that we can grow at the same robust rate as the last few years. Interest rates will remain low for the time being, until we reach the equilibrium point of balanced supply and demand of the green backs. It may even spike lower if there is a rush of conversion from yen to dollars.The Semi-Equipment Sector. Finally my long winded post is getting on topic. There are three problems that I see with the sector.
