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

To: MikeM54321 who wrote (5235)	7/21/1998 9:12:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 9980

Mike, the turnips have taken into account that Japan goes all the way to the brink, blinks and do something serious to correct the situation. Thus, the peak dollar vs yen at 156 yen/dollar. The scenario: Japan is slow to act, the yen weakens, Rubin does not intervene but try to extract action oriented promises, and then when we reach the technical top (also a double from the bottom, attractive to a trader like Rubin), Rubin comes to the rescue (after having extracted a pound of flesh) intervene, and Japan at least shows it'll do something. By that time, the fear that Japan's action lead to naught, creates a decline of good size proportion in the east (including a retest of the 14,300 on the Nikkei, with a good probability of a breach and a bottom at about 13,000 or so (part of the going to the abyss edge to wake them up). That together with other Asian problemns (the Indonesian Rupiah hitting 17,000 or so) precipitates our own little minimelt. But flow of funds (from Japan) forces our interest rates down below 5.5%, making stocks in essence a bargain (particularly in view of the fact that by then they are back between 8250 and 8500). Thus the beginning of the post minimelt rally. The rallies continues due to the old "liquidity" factor (money still leaking out of the Postal system), together with the recognition that Japanese policies are starting the rejuvenate the domestic demand in Japan (those little patriotic adds we talked about), and that we will not go much above a peak trade balance of about $17 Billions, and actually come down quite rapidly toward a level of about $12 Billion (and resume a multiyear process that was in progress until last year of narrowing the trade deficit). Inflation is nowhere in the cards (see my argument about the CRB crashing through 208 today), and our voters go to the election feeling good because the direction (not the level) of the market is again up. I think that Japan will heal its wounds and join the modern new world of the "consumption society". China will not be far behind, assuring perpetual prosperity for ever and ever (well, take this last sentence with a grain or two of salt, potassium cyanide, magnesium chloride, or whatever is your preferred "poison" <G>). Zeev