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

To: Henry Volquardsen who wrote (6876)	10/2/1998 12:57:00 PM
From: Worswick	Read Replies (2) \| Respond to of 9980

A bit from Adt... C(Adt) For Private Use Only "Mitchell R. Fulscher, Senior Partner of Financial Markets with Arthur Andersen in Tokyo, spoke last and made a terrific impact on the hall. Several Asian delegates actually walked out during his presentation. Certainly, what he had to say lacked palatibility for those immersed in the midst of the Asian crisis... Fulsher opened by saying that he had "nothing but bad news... Japan is going to get worse." The difficulty, he pointed out in block capitals on a hand-written overhead was that the Japanese had "NO CLUE ABOUT THE REAL PROBLEM". Fulsher also noted the levels of problem debts in other Asian countries compared to Japan: Malaysia, Thailand and Indonesia totalled about 465 billion dollars in total; South Korea alone had about 440 billion dollars of bad debt; Whereas Japan had a staggering 4.2 trillion dollars of estimated bad debt, compared to about 900 billion dollars for the rest of the region. Fulsher noted that the biggest problem with such numbers was not just the raft of bad loans in the system, but also the vast amount of bad accounting still being discovered. He noted how, at one stage, the levels of indebtedness of the banks had been given as c. USD 100 billion over one weekend (as an "honest to God cross our hearts and hope to die figure"), only for the MOF to revise this data up to c. USD 600 billion a few days later. Fulsher himself reckons the real situation could easily be in the region of 1 trillion dollars. Or more than the equity of all the banks... Then. of course, Fulsher added sanguinely, there is also the commercial companies' levels of indebtedness in addition to the banks... And, he added, even in such totally bankrupt operations such as the Hokkaido Takushoku bank, day to day operations still operated normally. Since the latter bank was taken over by a local rival several months back, there has never been any talk of closing the 100 or so branches which are certainly surplus to requirements. Let alone other cost cutting measures as a result of synergies in the newly merged entity. Entire industries rather than just companies were in trouble, Fulsher told us. He referred to several headline grabbing bankruptcies, including Sanyo Securities and Yamaichi Securities, as well as recent industrial casualties such as MITA and TOA. Indeed, referring to the CEO of the steel company MITA, Fulsher noted that this man had acknowledged that the company had been hiding losses for the past 12 years. "Were the Japanese, shocked, amazed or angry?" asked Fulsher. "No, they just shrugged their shoulders and said 'That's Japan'." "But wait," Fulsher cautioned, "It gets worse..." There is no plan for the resolution of the bad loan schemes. [Ed. This may have been resolved since the Burgenstock conference, but Mr. Fulsher seemed unimpressed by any plans in the pipeline as he spoke.] There is no recognition of the level or even the actual disease afflicting the Japanese financial system. Fulsher told a story concerning the (now apparently to be nationalised) Long Term Credit Bank (LTCB) and its copious debts. The government told Sumitomo Trust, 'You will take over LTCB'. Sumitomo Trust, an Arthur Andersen client, asked for clarification of the bad loan portfolio of the LTCB, which the government seemed reluctant to produce. The advice of AA's Tokyo office remained that, unless the government quantified and indemnified the bad loans portfolio, then this was a bad (to the point of being potentially fatal) deal for Sumitomo Trust. At the time of the Burgenstock conference, this clarification / quantification process did not seem to remotely appeal to the Japanese government. This was at the essence of the Japanese economic malaise: There is a "total denial of the problem" from the MOF and government, according to Fulsher. Moreover, the difficulties don't end with the extent of the bad loans. Rather, the problems are only beginning to be unveiled, as once the question of bank debt has been tallied up "then we need to consider the number of bad companies floating around". "I'm sorry for all this bad news" Fulsher concluded. Perhaps the most interesting point of all from this talk - other than the fact that it further confirmed what we've been telling you since last year - is just how forthright Fulsher was. This can only discourage some Japanese companies from taking their business to his organisation. If the situation has got so bad in Japan that a massive firm like Arthur Andersen reckons it's better to put potential clients off rather than accepting just about anybody with open arms, then that is perhaps the most frightening point of all..."

To: Henry Volquardsen who wrote (6876)	10/2/1998 2:11:00 PM
From: Paul Berliner	Read Replies (3) \| Respond to of 9980

Henry, thread: R.E. Y2K testing...... Silicon investor is filled with dozens of threads championing countless Y2K stocks. It's a total waste of time & very unproductive to start a thread on favorite picks. There's only one thing that needs to be mentioned - everything else on the Y2K threads is irrelevent. The key is this: We all know how the media is always the catalyst for any market frenzy: The 'net stocks, the cancer stocks, etc. Y2K will be different because the boom in related stocks will last for the entirety of 1999. The 'net stocks and cancer stocks had only brief rallies, and now only a select few continue to soar. What will happen is as follows: The media has been keeping Y2K in its back pocket and will unleash its awesome marketing and readership/viewership boosting power starting Jan 1 1999. Your first issue of Time or Newsweek for 1999 will start the frenzied panic. The headline will probably read 'only 364 days left until the end of the world'. As the weeks and months progress in 1999, the media-constructed panic will only increase, culminating in a spectacular rise in all solid Y2K stocks in the 4th Q of 1999. Nothing short of world war will keep the global media from bombarding us with various doomsday scenarios. And I personally believe that the procrastinators and Y2K sceptics in the far east will fall to their knees in submission of this great beast. A global recession is almost certain, with a global depression not unfathomable. Picture the GM work stoppage. It made quite a noticeable dent in GDP figures. Imagine if there are 50 or even 100 GM-sized companies outside the U.S. who may have procrastinated and been sceptical of the problem and therefore will remain unprepared at the midnight hour. If they all have to stop their manufacturing operations for say, 2 months while the problems are fixed, the effects on world growrh will be devestating. I do plan to position myself accordingly, because regardless of whether Y2K turns out to be a hoax or a beast, the preceding doomsday scenarios that will be relentlessly spun by the media will surely cause the street to pile into the available plays.