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FYI...
JW
-----Original Message-----
From: James Smith [mailto:JSmith@xxxxxxxxxxxxxxxxx]
Sent: Monday, April 03, 2000 10:00 PM
Subject: NASDAQ: "Those who didn't call the correction also
won't be
able to tell you how far its going"
Today's story is the NASDAQ, but how far will it correct?
See our daily report for our levels, but one level I don't
mind repeating: We cannot rule out a test of 2281--basis
the Nasdaq 100 Futures, June contract,---which is
1st mthly support. If that sounds too extreme, just back
up for a minute. Most analysts were up until very recently
saying that a correction to where we are today was not in
the cards. All we heard over & over was the funds flow
mantra, how huge the inflows were & how this meant the
Nasdaq could not possibly correct.
Will other markets be affected?--
You bet! That great sucking sound that Perot was
so worried about a few years ago is not jobs going south of
the
border,its jobs coming to the US and all the imports coming
in.
The US economy will not slow sufficiently fast enough from
4th Qtr rate of growth (7.3%) to stop more rate hikes.
More rate hikes will hurt old economy stocks more.
Sure the DOW & the S&P may benefit short-term from
a "flight-to-value", as the Nasdaq continues to plunge,
but by MAY, a TP & PANIC CYCLE for the DOW
will act like a brick wall.
There is such a thing as "Time Resistance" as well
as "Price Resistance."
Nimble traders may make profits on the ride higher in the
DOW & S&P but don't expect to use these emails
to daytrade. Short-term traders should really look at our
daily reports to get all the support and resistance levels
and our timing signals.
Also, it may appear that the DOW is headed for New Highs
but until we see closing New Highs on the DOW, we cannot
confirm a BLOWOFF RALLY for the DOW. The S&P on
the other hand, has broken to New Highs above 1500,
signalling a blowoff into the end of April/early May.
NOTE: A BLOWOFF RALLY is not at all the same thing
as a sustainable move higher. Stocks globally will tumble
in next few months as fear spreads that the US economy
won't suck in imports at same furious rate as more rate
hikes,
or even just the fear of more rates hikes, take their toll.
The irony here is that the USD will get stronger???
Think about it!
Weaker economies (without mentioning any names)
(Japan and Europe)
will use their currencies as shock absorbers to try
to maintain exports to the United States in the face
of weakening demand, and in the hopes of slowing
the pace of their own plunging stock markets.
For better and now mostly for worse, the global
economy depends too much on the ability of
the US economy to continue sucking in imports.
We don't need the IMF to tell us that the US
cannot go on maintaining a collosal trade
deficit. But many analysts wrongly view this
as a reason to sell dollars.
They are wrong.
Neither Europe nor Japan can afford to raise rates
in lock-step with the FED. If the Nikkei starts
tumbling, as we expect it will, extending a 10
year bear market into a 12 year bear market,
the Yen will plunge because.....because...
....that's the only thing they haven't yet tried!
They've spent more than a trillion dollars
on pork barrel projects that mostly benefited
the Yakusa and people outside Tokyo....
but not the economy. They've kept short
rates artificially low for an extended period
to the point of causing Life Insurance and
Pension Funds great great concern in
meeting their obligaitions. The
fastest ageing country in the world is in
jeopardy of not fulfilling its obligations to
the elderly.
MANY YEARS AGO.
According to Japanese tradition, when a
family could not afford to feed everyone,
the oldest would often volunteer to go
away....literally go to a mountain and die.
I think this is a very noble tradition and
the MOF, BOJ, and the DIET should
set an example by being the first to.....
...go the mountain.
Afterall, it is their policies that are
causing the chaos in the first place.
Keep in mind that a cyclical correction makes
your currency more favorable to traders than
a structural correction. Japan still hasn't made
the structural changes necessary to enable
them to handle the next downdraft in the
economy.
SPIN MEISTERS IN OVERDRIVE
The Japanese govt plans to issue $94 bn
worth of a new type of bond next year to
offset a funding crisis. In addition to issuing
more JGBs, they have now come up with
"Zaito bonds."
So a nice shell game is in order.
It appears the Japanese govt believes that
by giving these bonds a different name,
"Zaito Bonds" rather than JGBs, they
can escape the scrutiny of a financial
market that is worried about the very high
Japanese debt to GDP ratio (130% of GDP).
Because much of the debt (almost all of
it) is owed by Japnese to Japanese,
this ponzi scheme has gone on longer
than most outside observers would have
guessed possible. Many a gaijin trader
have shorted JGBs to their own demise.
But it is equally untrue to say that this
debt does not matter simply because they
owe it to themselves. Those Japanese
institutional accounts buying JGBs are
merely intermediaries. Their own
obligations are to investors, pension
fund clients, and normal people who
buy life insurance policies. Japanese
people will put greater demands on
these insitutions as they retire in huge
numbers and demand their money.
The old boys club in Japan in which
Japanese politics and business are
inseparable, has been able to
postpone the day of reckoning,
but they cannot escape it.
THE LATEST RUSE
The govt has been over the years
pilfering Postal account money to
fund infrastructure projects. Many
of the postal accounts are now unlikely
to be renewed (as many accounts come
due this year & next).
To offset this obligation, Japan will
issue "Zaito bonds".
It won't work because debt is debt.
Whether you call it a Zaito bond or
a JGB, you still have a debt at 130%
of GDP in fiscal 2000....and moving
ever higher.
Keep in mind that every country that
has ever existed that gets into such a
mess resolves its troubles the same way.....
..they either default on their debt...or...
...they turn their currency into monopoly money
paying back their debts in a currency of no
value.
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