|
PureBytes Links
Trading Reference Links
|
-----Original Message-----
From: Gerrit Jacobsen <jrt@xxxxxxxxxx>
To: bruceb <bruceb>; omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Sunday, September 06, 1998 5:59 PM
Subject: Re: Never been more long term bullish...
>Bruce,
>I am glad that you are back - I had already feared that you had
>changed your opinion :-)
You won't be able to get me to crack for the next ten years (but keep
trying, I like your posts...).
>> Because of the easier access to information technology, US companies
>> and individuals will be better prepared in the hi tech world of the
>> future.
>You might be surprised how many computers there are in other
>countries. Because computers are so cheap even poor countries can
>afford them. Which is why countries like India are suddenly producing
>computer programs and their programers do not get 100000$/year .....
No offense, but I'm not worried. There's not another country in the world
that is even close to the US in regards to the percentage of businesses and
individuals that own computers, and recent world events are only WIDENING
our lead. As for those foreign programmers, the US just increased the
number of visas for hi tech workers. Any Indian programmer worth his or her
salt is on a plane heading toward Silicon Valley right now, and when they do
start earning 100K/yr, they'll bring their family over and stay for good...
>> Just a few years ago we were all worried about how we
>> would ever compete with Japan and Asia. The lead we are currently
>> accumulating from cheap information technology makes me wonder if
>> Asia will EVER catch up to us...
>Again, cheap information technology gives even third world countries
>the chance to sell services over the internet. You will be surprised
>how quickly the Asians will be back. Korea (South), Thailand etc. are
>all running trade surplusses. Once they have got their
>corperate restructurings through they will be stronger than ever. Why
>do you think there are so many Asians on American universities ? They
>work harder, learn harder and make more children. The Asian market
>has been crippled by overspeculation and overinvestment. The market
>there had run ahead of itself - does this sound familiar ?
Gerrit, if I'm too optimistic about the US, you are WAY, WAY too optimistic
about Asia. The problems in Asia (not including Japan, whose problems are a
little different) began because of the global capital flows I mentioned in
my original message. Global trade was very good to Asia because their
governments created mercantilist systems that heavily favored exports and
severely inhibited imports. Since the US was willing to go along with the
arrangement, their economies flourished.
Global capital flows threw a wrench into the equation that the Asian
economic model was completely unprepared for. At first, the influx of
foreign money looked great to the Asians. They were being offered money at
much lower interest rates than they could get from local lenders, as long as
they borrowed in dollars. There didn't seem to be any downside to borrowing
in dollars, because their governments had pledged to peg their currencies to
the dollar at a fixed exchange rate.
Unfortunately this foreign money at lower rates combined with very closed
economic system led to a classic real estate bubble, which when it popped
brought the entire economy down with it. The foreign investors, for their
part, made some terrible decisions of their own. Primarily, they were
willing to "go along" with the Asian system, and not require their borrowers
to follow the same rules of due diligence they would've required of any
western customer. Companies that had no concept of western accounting
standards were given loans just as easily as the ones that did.
Now, however, the whole ballgame has changed. Western lenders (the IMF) are
demanding that Asia radically change their entire economic system before any
relief is given. Businesses and individuals are being asked to totally
reject a system that worked pretty well for them for several decades, and
adopt a more open system that (to a large degree) is completely incompatible
with their culture.
Although Felix could certainly shine more light on this subject than I can,
I do know that in many Asian cultures, lying is actually considered a more
honorable thing to do if telling the truth would lead to great embarrasment.
If you ask the Japanese government the value of all the bad loans on the
books of their banks, the answer changes daily and is nowhere close to
reality. How is any intelligent, rational investor supposed to make an
informed decision in such an atmosphere? This obviously doesn't apply to
someone like Felix who is "on the scene" and is therefore capable of finding
the needles in the haystack.
This is why when you recommend investing in Asia (and Russia) Gerrit, you're
not investing, you're gambling. The simple fact is you have no idea what
you're buying. When I buy Yahoo, I at least know what I'm getting, even if
their profit is very small. You simply can't say the same thing about Asian
or Russian stocks. That $200 million profit they're reporting may really be
a $200 million loss if they had their books audited by an American
accounting firm (and even then I'd still be suspicious). There will always
be a Cendant or two in the American markets, but overall the system is
pretty clean (outside of the penny stocks).
The fact that certain Asian countries are reporting trade surpluses is
meaningless. Their currencies and standards of living has been so
decimated, it would be almost impossible for them NOT to run a surplus. Is
that something to be proud of? To make matters worse, Asian governments are
beginning to outright REJECT the western economic system. Thailand has
already begun to impose restrictions on its financial markets, and Hong
Kong, once the epitome of free market capitalism, has started to buy it's
own stock!
I'm sorry Gerrit, but when you say "once they have got their corporate
restructurings through they will be stronger than ever," you act as if this
is going to happen any day now. The Asian meltdown began over a year ago,
and things so far have only gotten worse. There might be a few bright
spots, but the overall prognosis is grim. But don't just take my word for
it, look at the actions of Asian investors themselves.
We all know that Asian money has been flowing into the US debt market in a
flight to quality. What hasn't been reported very widely is that most of
this money has been flowing into long term debt instuments, such as 30yr
Treasury Bonds. If the Asians themselves were expecting a quick turnaround
in their economies, this money should have gone into short term paper, such
as Treasury Bills, especially when you consider that the interest rate
differential between the short end and long end is extremely small right
now.
If Asian investors aren't expecting things to improve soon Gerrit, why do
you? And as for those Asian students in US colleges, why do you think so
many of them chose to stay in the US after they graduate?
The good news is, none of this means a hill of beans to the US economy.
We'll just keep rolling right along...
>> As TJ, Tony Haas, and I have already said, people are still getting
>> up in the morning, going to work, and pouring money into their 401ks
>> and IRAs. This money is temporarily being parked by fund managers
>> (who think they can time the market, even though their track record
>> is terrible) in bond and money market funds. This money is
>> accumulating like a time bomb, getting bigger and bigger by the day.
>> Once the political situation is resolved, that money is going to
>> flow back into equities, and the "upside panic" will begin.
>A panic upside has never happend and will never happen because it
>takes more money to get the market up than down. To get the market
>down you don't even need buyers.
Look at the chart of the S&P between January and April of this year. That's
my definition of panic buying.
Bruce
|