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Regarding the demographics in Japan, I recommend an excellent
article in this month's Atlantic Monthly by Murray Sayle. He has lived in
Japan for a few years, still lives there, and he gives a first-hand account
of the ecomomic environment in Japan.
db
-----Original Message-----
From: HBernst963@xxxxxxx <HBernst963@xxxxxxx>
To: johnstev@xxxxxxxxxxxxxxxxxxx <johnstev@xxxxxxxxxxxxxxxxxxx>;
realtraders@xxxxxxxxxxxxxx <realtraders@xxxxxxxxxxxxxx>
Date: Thursday, June 11, 1998 4:28 AM
Subject: Re: MKT - The "Big Picture"
>
>(a) Jerry Favors is still bullish. He is looking for 9500-10300 to mark the
>final top. Only if 8700 is broken can he say the top is in.
>(b) Yes, PE is very high but we are already higher than any previous high.
Who
>knows how long the mania can continue?
>(c)PPI and CPI are good gauges of inflation. Look at the CRB - it set 5
year
>lows yesterday. Journal of Commerce index also at new lows. This is very
>bullish for bonds and bonds prices tend to lead stock prices. Caveat -
unless
>you believe we're having a repeat of 1929-32, the low rates will keep
prices
>from falling too far (8-15%).
>Don't forget that interest rates rose for over a year before the Sept. 1929
>top and the Fed reduced money supply by 35% in 1930-1931. Greenspan, in
>response to the Asian crisis, has increased our money supply by a 9% annual
>growth rate to offset the deflationary tendencies.
>(d) technically the market does look shitty. Falling AD line, new highs
peaked
>last October, volume peaked last November, insiders selling at rapid pace.
But
>with bonds and utilities making new highs (and the idiotic public
continuing
>to pour money in), you still have to give the benefit to the bulls.
>(e) Before I hear a reply from someone that 'Japan has low interest rates
and
>their market is still down 60% from the top', I have two responses:
>1. Japanese broad money supply has dropped from a 16% annual growth rate in
>1989 to approximately zero today (and reached a low of -2% in 1996-7).
>Increases in money supply is the fuel that drives the economy and markets.
>This is as true today as it was 100 years ago.
>2. See Harry Dent's The Great Boom Ahead for the demographic argument.
Japan
>has a much older population and is straining to meet social security (or
>whatever they call it) payments. We still have 5-10 years left before the
big
>top.
>
>Howard Bernstein
>P.S. Just because I'm bullish longer term doesn't mean I won't reduce my
longs
>should the Dow make a new high with these continuing divergences.
Especially
>if rates then start to tick up.
>
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