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

To: Robert Douglas who wrote (5246)	7/22/1998 12:31:00 PM
From: Joe Dancy	Read Replies (2) \| Respond to of 9980

Some interesting recent articles: The Japanese fear the economy is not the sole problem - crime, scandal, suicides adding to country's woes jolting for many Japanese citizens.Their group-oriented, risk-averse culture is suddenly being reshaped by a competitive world that places a premium on risk and individual achievement, economists say. dallasnews.com The dollar surged against the yen on worries that the apparent front runner to become Japan's next prime minister is not the right man to lead an economic recovery. Tokyo stocks fell sharply. globe.com United States Treasury Secretary Robert Rubin has urged the new Japanese Government to take rapid action to solve its economic problems and avoid the inactivity that characterised the last days of the Hashimoto regime. "It's absolutely imperative Japan moves effectively and expeditiously to deal with its economic issues, in particular making sure the fiscal programme is sufficient to generate domestic demand-led growth," he said. scmp.com Key pillars of Japan's economic model are collapsing and industries must make dramatic changes to lift the economy out of recession, the government said Friday. In a grim report, the Economic Planning Agency said Japan's economy is "stagnating" and that time-honored practices such as lifetime employment and seniority-based promotion are not working. detnews.com Joe

To: Robert Douglas who wrote (5246)	7/22/1998 12:48:00 PM
From: Sam	Read Replies (2) \| Respond to of 9980

Robert, "Mr. Greenspan made two salient points yesterday. First he mentioned that corporate profits, contrary to the predictions of many Wall Street analysts, cannot continue to rise at the extraordinary rate of recent years. Secondly, he mentioned that the greater threat lies in inflation and not recession. I believe both his warnings are very timely for investors." I can't dispute the first point above, but the second seems at least questionable. A month or so ago, someone posted an analysis from the Stratfor Group talking about overproduction in China; specifically, they claimed that there are 5 billion suits (quality unknown) sitting in Chinese warehouses gathering moths that cannot be sold. Even if that number is bogus (who could count them, anyway, to be sure about the number?), the point is clear: the production capacity of the Asian region (just China alone, for that matter) is enormous. Their consumption capacity is far far less, without even taking into account their depreciating currencies. They make our clothes, our shoes, our electronic gear, our toys, our appliances, gadgets and widgets of every stripe that we buy and use everyday, and they NEED our cash. They have shown time and again that they are not terribly sensitive to demand reality--that is, they just keep building capacity whenever possible and aim for market share--even dominance--at any cost. When the market sours, they blame other players for overbuilding, as Samsung recently did with the Taiwanese semiconductor companies, and as Fujitsu did with US drive vendors. Some of the larger companies occasionally show that they understand that profit is important as well as market share, but they often got to be large in the first place by playing the market share game, and their model is followed by legions of other would-be fortune creators. And they just play the same game in markets they want to be in, but are not yet dominant. Why, given this, is not DEFLATION (and eventually recession, as productive capacity increasingly leaves the US for other low cost areas) rather than inflation the major cause for worry? Yes, labor costs in the US are going up. But are companies going to act like baseball teams when they pay people? Surely most of them will do some sort cost benefit analysis, and ask whether this $5,000 bonus is worth paying to their new worker. Maybe they'll be wrong, in which case they will lay them off eventually. Or they'll go set up shop in Mexico, Brazil, the Far East, wherever, to produce whatever it is they are producing. Milton Friedman is surely right in saying that monetary factors are a cause of inflation, but is surely wrong in thinking that it is the ONLY cause, that it is a sufficient cause, and that there are no psychological components to it. When there is strong resistance to paying more, and there are alternatives, companies look harder to find ways to reduce costs. When they can't find them anymore, and the deflationary psychology is still reigning, they have to pull in their horns, or they may even go out of business. Sorry, I probably started drifting at the end, but I hope the question about inflation is clear at least. Gotta go now. Sam

To: Robert Douglas who wrote (5246)	7/22/1998 4:23:00 PM
From: MikeM54321	Read Replies (1) \| Respond to of 9980

"The "Asian crisis" is nothing more than a well publicized bump in the road. Number me among the bulls." Robert, Very sorry to be pulling up your old quotes AGAIN! I happen to follow semiconductors (I believe a lot of Asia Forum followers are into techs) and I remembered you posted a bullish statement on some related thread. Well I looked it up, and it was on the Cymer thread. You posted the above four months ago. And just recently, I recall a post from you, on this thread, concerning your plans to actually short the greenback! So it appears, between four months ago and today, you have developed some grave concerns about US economy and equities markets. I think you are most concerned about our current account deficit getting out of hand and doing damage to the greenback. Seems to me, as long as foreigners want to finance our debt, we can keep on buying for a long time. But let me ask you a specific question regarding this. Do you see something on the horizon that indicates investment flows, to the US from foreign countries, is slackening? Thanks, MikeM(From Florida)

To: Robert Douglas who wrote (5246)	7/22/1998 9:34:00 PM
From: Frodo Baxter	Respond to of 9980

Hey Bob and others... So I've been fixating on money supply growth and GDP growth. As you know, and as I've plotted on my silly website, real M3 growth has overtaken real GDP growth. This has been interpreted by the strict monetarists as an inflationary warning. Others have suggested that this is not inflationary because dollars are supporting foreign economies. So I was thinking... you think it'd be kosher to subtract the trade deficit from M3 growth? As those greenbacks have been effectively taken out of circulation. Or would that be too screwy, as they are still exchanged for goods. (you know, the too few goods which are being chased) Or should I just follow gold and commodity prices?