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Hi Fred,
Wednesday, July 16, 2003, 8:31:38 PM, you wrote:
F> Trading in international markets is getting tougher from a US
F> perspective. Although Europe, UK and Japan indicies have been up
F> wonderfully the last few months, the currencies are being beaten
F> up ( Especially the Euro & BP ) since mid June.
This is certainly a fact, and it's amazing to me that foreigners have
come in here like this in this situation. Our currency no longer
floats, contrary to what many would believe. It is now clearly a
managed currency with dollar peg, enforced by the Bank of Japan. They
just don't admit that publicly, but it is certainly the situation. It
is also clear that the BoJ will take every opportunity to *weaken*
the currency vis a vis the dollar; only severe dollar weakness has
prevented this from happening already. So, the foreign investor
here, especially a US dollar base-currency investor, is looking at
almost zero chance of currency appreciation, and a darn good chance
of having a lot of or even all capital appreciation offset by
currency risk. The whole thing makes little sense to me, and it was
one of the reasons I doubted the "foreign" rally here. But in they
have come, massively, buying our shares like we have no problems, and
like there is no risk. I have to assume this is very hot money. The
currency risk is astounding to me right now. If the US does pull off
a strong economic recovery, the dollar should cease falling versus
the Euro. That would be enough to send it higher against the yen I'm
sure. Some folks could see their capital gains here evaporate from
currency risk very quickly. The BoJ is not about to defend the yen
from a 20 or 30 percent fall against the dollar, should that happen.
And in the past, these sea changes have taken place all of a sudden,
in a matter of a few days.
Best,
Yuki
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