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Earl
My one comment would be that I believe the stock market bubble was in
fact a result of the real estate bubble inflating the assets of listed
companies. When the real estate bubble burst, it simply swept the stock
market with it.
The US has not been subject to the same 'whipsaw' of a real estate peak
and trough.
Regards
DanG
Earl Adamy wrote:
>
> Caveat: I do not consider myself to be have much depth of knowledge
> regarding Japan.
>
> I would suggest that Japan has 3 problems at the root of its economic
> problems: stock market bubble, real estate bubble, and manufacturing
> competition from Asia and China. The later seems to be resulting in both
> deflation and unemployment in Japan not to mention considerable trade
> friction, especially with China. (The US is extremely vulnerable to the same
> set of problems with respect to imports from China and other countries.) The
> Japanese have typically adapted to international manufacturing imbalances by
> building factories off-shore. This has worked very well for Japanese
> manufacturers in Asia ex-China, however China's history with Japan is one
> which has tended to create a less hospitable environment for Japanese
> manufacturing investment. Thus, heavy imports from China are not offset by
> strong manufacturing earnings.
>
> I think you are correct that homogeneity has been a two edged sword ... the
> plus side has been social stability and the minus side has been ineffectual
> problem solving. By contrast, facing and solving problems when forced to do
> so, has been a particular strength in the US. There seems to be some
> evidence that Kozumi (sp?) and others may find strong nationalism to be a
> politically more palatable route than facing the problems. This could lead
> to friction between Japan and the rest of Asia (particularly China) and even
> with the US.
>
> Earl
>
> ----- Original Message -----
> From: "Daniel Goncharoff" <thegonch@xxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Monday, September 10, 2001 7:19 AM
> Subject: Re: [RT] Markets: Stock Index Futures and regulation
>
> > Earl
> >
> > I have a different understanding of what has happened in Japan. I
> > thought the drop in Japan was caused by two factors, a massive real
> > estate bubble combined with a real plateau in manufacturing. Only when
> > the bubble burst did it become clear that the real economy was
> > deteriorating, and it never found a bottom.
> >
> > I also think the Japanese would disagree that their homogeneity is a
> > strength -- they are starting to come to the opinion that it is the
> > reason they 'can't get up'. There is no way to dispose of old baggage...
> >
> > As for 1929, I think the similarities are there. Raw material producers
> > have been struggling with deflation. The 'popular' (populist?) view
> > seems to favor less globalisation rather than more. There is no specific
> > global military threat, so the developed countries have more incentive
> > to fight over differences rather than smooth them over. Traumatic events
> > (by definition?) come when you don't expect them.
> >
> > Regards
> > DanG
> >
> > Earl Adamy wrote:
> > >
> > > Rakesh,
> > >
> > > As a trader I use technical analysis exclusively. My bias toward
> technical
> > > analysis carries into longer term investing except when I believe there
> are
> > > extreme conditions in the market. I also have long had an interest in
> long
> > > term market history because I do believe that there are lessons to be
> > > learned from history and that markets move from one extreme to another
> and
> > > back. However first and foremost in trading and investing is capital
> > > preservation. Thus I was a couple of years early in starting to ease out
> of
> > > equity investments and I may be a couple of years late in easing back
> in.
> > >
> > > I believe that there are many similarities between the current US market
> and
> > > both the Japanese and post-crash (29) US market. There are also many
> > > differences ... one is the dependency of the US economy on services (the
> > > Japanese and 29 economies were manufacturing based) and another is the
> more
> > > homogeneous social makeup of the Japanese society. The later is
> significant
> > > because the Japanese (and to a lesser degree European) social orders are
> > > less driven by free wheeling capitalism which I believe has been carried
> to
> > > an extreme in the US and (particularly in Japan) the homogeneous society
> has
> > > eased the financial pain of depression. Never-the-less there is a
> creative
> > > and free wheeling spirit here which should not be underestimated because
> it
> > > has proven itself capable of adapting to (and leading) tremendous
> challenge
> > > and change for several centuries.
> > >
> > > Still, in my mind, the excesses have been carried so far over a period
> of
> > > decades that there must be a long/steep corrective period. The pain will
> > > happen ... it is up to those attempting to manage the economy whether
> the
> > > correction will be long or will be deep. In the US I would add that
> there
> > > has been a general preference for the public rather than business to
> take
> > > the brunt of economic pain e.g. the banks are profiting handsomely on
> rate
> > > spreads while the public is paying relatively high rates for credit.
> > >
> > > All selling machines are always in gear and Wall Street is no exception.
> > > When sales slow and inventories pile up at car dealers you don't hear
> them
> > > running negative advertising, neither does Wall Street. The astute
> investor
> > > will take some independent measures and reach conclusions independent of
> the
> > > hype.
> > >
> > > As for investing in a major turn in the markets, on technical basis I
> will
> > > need to see weekly charts with well established bullish trends
> (particularly
> > > good looking, bullish linear regression channels) and on a fundamental
> basis
> > > I want to see companies with strong market positions, honest accounting
> and
> > > good values in the stocks in which I invest ... this requires a major
> mind
> > > shift from investing in markets which are already in a steadily rising
> bull
> > > market.
> > >
> > > What I really expect to see is the time come when absolutely no one
> wants to
> > > own stocks (this last happened in the 30's and 40's) and that is when I
> > > expect to start shopping for real bargains with real earnings and real
> > > dividends. In the interim, I continue to like bonds and believe they are
> > > probably a double over the next 5-10 years (look at the history of
> interest
> > > rates in the 30's and modern Japan). I remain undecided on currency
> issues
> > > because I think the issues are more degrees of pain rather than a safe
> > > haven. If world economic woes bring a rise in nationalism and
> > > political/social dislocation (I think this is a good possibility), arms
> > > makers may lead an economic rebound.
> > >
> > > More than anything else, one must continuously observe (independently of
> the
> > > media), think, and adapt to conditions as they unfold.
> > >
> > > Earl
> > >
> > > ----- Original Message -----
> > > From: "Rakesh Sahgal" <rsahgal@xxxxxxxx>
> > > To: <realtraders@xxxxxxxxxxxxxxx>
> > > Sent: Sunday, September 09, 2001 8:08 AM
> > > Subject: Re: [RT] Markets: Stock Index Futures and regulation
> > >
> > > > Earl,
> > > >
> > > > In your write up on the prospects for the economy in your country you
> have
> > > > primarily relied upon fundamental concerns(if I understand you
> correctly)
> > > > which are coming to the fore now, rather being touted by the salesmen
> of
> > > > Wall St. now when the markets have already tanked.
> > > > These factors were not being cited by Wall St. gurus and their
> underlings
> > > > globally earlier on, when the markets were touching the skies.
> > > > Cant one infer from these shenanigans that "they" have exhausted
> > > > inventories and and are now re-stocking or is this assumption
> erroneous?
> > > > This I ask in light of the fact that sooner than later the easing
> > > > liiquidity conditions will make themselves felt in the economy. Also
> how
> > > > relevant are the comparisons of the U.S economy with the Japanese
> economy
> > > > with their structural differences( or am I again ignorant of the
> > > similarities)?
> > > >
> > > > Once Ira had posted that the Wall St. selling machine always finds
> > > > stories/concepts to tout after the current rage is dead and buried.
> Are
> > > you
> > > > saying that the conditions are going to be so dire that the markets
> are
> > > not
> > > > going to reward performance and/or the prospects of performance of the
> > > next
> > > > great "find"?
> > > >
> > > > You further state in your message below, that you are willing to
> change
> > > > your analysis contingent upon contrary evidence emerging. Given your
> very
> > > > strong views what would you term conclusive evidence keeping in view
> the
> > > > fact the charts will essentially lead the economy and corporate
> > > > performance? Would you wait for confirmatory economic data and enter
> the
> > > > markets on pull backs in the new trend or trade major support
> > > > points/projections with stop losses?
> > > >
> > > > Look forward to your comments.
> > > > Regards.
> > > >
> > > >
> > > > Rakesh
> > > >
> > > >
> > > > At 08:06 AM 9/8/01 -0600, you wrote:
> > > > >Yes, that was a typo, I was referring to the introduction of single
> stock
> > > > >futures. I do not disagree with your observations as they relate to
> > > current
> > > > >market conditions. My comments are directed toward conditions
> existing in
> > > a
> > > > >major cyclical bear market of the type and scope we have not seen for
> > > nearly
> > > > >a century. Should those conditions emerge, I believe that the
> enthusiasm
> > > > >for, and regulation of, derivatives will change markedly.
> > > > >
> > > > >I should, perhaps, add a few caveats regarding my opinions. I am
> > > personally
> > > > >extremely bearish in my view of the equity markets for the next
> decade.
> > > This
> > > > >is reflected in the fact that my investments have been 100% in long
> term
> > > > >treasuries and bond funds for well over a year now and I am even now
> > > > >completing the process of switching bond funds (most of which contain
> > > GSE's
> > > > >and corporates) for treasuries. Futures trading is another matter, I
> > > don't
> > > > >care if the market goes up or down as long as it does one or the
> other,
> > > > >preferably in a trending manner. Finally, my investment hat is in no
> way
> > > > >married to the bear case should strong evidence emerge to the
> contrary,
> > > > >however I am in no way interested in trying to time my investments to
> > > catch
> > > > >the absolute bottom in this market.
> > > > >
> > > > >Earl
> > > > >
> > > > >----- Original Message -----
> > > > >From: <I4Lothian@xxxxxxx>
> > > > >To: <realtraders@xxxxxxxxxxxxxxx>
> > > > >Sent: Saturday, September 08, 2001 7:32 AM
> > > > >Subject: Re: [RT] Markets: Stock Index Futures and regulation
> > > > >
> > > > >
> > > > > > Earl:
> > > > > >
> > > > > > With all due respect, stock "index" futures have been a huge
> success.
> > > I
> > > > > > believe you wish to be skeptical of single stock futures. And
> given
> > > then
> > > > > > attendance and interest shown by the futures and securities
> industry
> > > this
> > > > > > week at a seminar in Chicago by the Futures Industry Association,
> I
> > > beg to
> > > > > > differ with your conclusion.
> > > > > >
> > > > > > Single Stock Futures, in my opinion, will be the single largest
> new
> > > > >product
> > > > > > we have ever seen introduced. There will be three exchanges in
> the
> > > U.S.
> > > > > > offering them, a very aggressive and with it Nasdaq-LIFFE, the yet
> to
> > > be
> > > > > > named but formidable Chicago Joint Venture of the CBOE/CME/CBOT
> and
> > > the
> > > > >just
> > > > > > announced AMEX. What product have we had launched by three
> exchanges
> > > all
> > > > >at
> > > > > > the same time?
> > > > > >
> > > > > > Keep in mind that the banks wanted nothing to do with the CBOT
> when
> > > they
> > > > > > launched the bonds. Six months later they were knocking down the
> > > doors
> > > > >for
> > > > > > memberships and floor space. Look at the influence of stock
> volumes
> > > from
> > > > > > tine introduction of options trading in the 1970s and stock index
> > > futures
> > > > >in
> > > > > > the 1980s. Volume took off and never looked back. Nearly 1/3 of
> the
> > > > >weekly
> > > > > > NYSE volume comes from program trading alone.
> > > > > >
> > > > > > The new single stock futures will offer tremendous capital and
> > > operational
> > > > > > efficiencies to some of the largest players in the industry. No
> more
> > > > >waiting
> > > > > > t+3 for stocks to settle. Same day settlement. Marked to the
> market
> > > at
> > > > >the
> > > > > > same clearing house, the OCC, for all the single stock futures and
> > > options
> > > > > > trading. Same clearing house for settlement and delivery of
> options
> > > and
> > > > > > futures contracts.
> > > > > >
> > > > > > Take then that the biggest corporate names in the world are U.S.
> > > companies
> > > > > > that can be traded as SSF. Take then that the U.S. capital
> markets
> > > are
> > > > >the
> > > > > > best in the world in terms of legal certainty, regulation and
> > > fairness.
> > > > > >
> > > > > > These are all parts of the equation why single stock futures will
> > > work.
> > > > >Will
> > > > > > they take volume from stocks? Yes and no. That same argument was
> > > made
> > > > >when
> > > > > > options and indexes were introduced and they only added to the
> > > liquidity
> > > > >of
> > > > > > the market. With the movement of time we have been able to
> introduce
> > > > >better
> > > > > > and better contracts to specifically meet the needs of traders,
> > > hedgers
> > > > >and
> > > > > > investors. We no longer need to run into gold or soybeans to
> hedge
> > > our
> > > > > > inflation or deflation risk. These tools will only make what
> people
> > > want
> > > > >to
> > > > > > do, and do, more efficient.
> > > > > >
> > > > > > And I for one and going to do my best to make sure they will be
> > > > >successful.
> > > > > > Part of the reason I write my daily industry newsletter is to help
> > > people
> > > > >in
> > > > > > the futures and securities industry manage the changes all around
> us.
> > > Just
> > > > >in
> > > > > > the last week I have had a President and CEO of a U.S. exchange
> sign
> > > up
> > > > >for
> > > > > > the letter. A Senior Vice President of one of the Chicago
> exchanges
> > > > >signed
> > > > > > up. A large division of a clearing FCM will shortly be announcing
> > > they
> > > > >are
> > > > > > going to license my letter to offer to their clients and to
> attract
> > > new
> > > > > > clients. They will be offering it at a single stock futures
> > > newsletter.
> > > > > >
> > > > > > So, all the signs I see say that these new products are going to
> work.
> > > > >And
> > > > > > as the Nasdaq-LIFFE said, they are going to "make" them work. I
> have
> > > > >never
> > > > > > seen an exchange so confident, so focused on the good of the
> customer,
> > > so
> > > > > > focused on offering a level playing field for all participants as
> the
> > > > > > Nasdaq-LIFFE. And I believe them.
> > > > > >
> > > > > > Regards,
> > > > > >
> > > > > > John J. Lothian
> > > > > >
> > > > > > Disclosure: Futures trading involves financial risk, lots of it!
> John
> > > J.
> > > > > > Lothian is the President of the Electronic Trading Division of The
> > > Price
> > > > > > Futures Group, Inc., an Introducing Broker clearing Man Financial
> Inc.
> > > > > >
> > > > > >
> > > > > >
> > > > > >
> > > > > > In a message dated 9/8/01 7:17:41 AM Central Daylight Time,
> > > > >eadamy@xxxxxxxxxx
> > > > > > writes:
> > > > > >
> > > > > > << I doubt that stock index futures are going to get very far off
> the
> > > > >ground.
> > > > > > Essentially, stock index futures (low margin and high leverage)
> are
> > > the
> > > > >last
> > > > > > nail in the coffin of post-29 market regulation. I believe that
> we
> > > are in
> > > > > > the early stages of a major cyclical bear market and I expect to
> see
> > > > >stock
> > > > > > market volumes diminish to levels not seen in decades as a
> byproduct
> > > of
> > > > > > severe price declines ... the pendulum always swings from one
> extreme
> > > to
> > > > >the
> > > > > > other. I further expect that liquidity in the futures and options
> > > markets
> > > > > > will suffer.
> > > > > >
> > > > > > I find it especially ironic that the post-29 market and banking
> > > > >regulations
> > > > > > were removed just as the markets moved to such excess. The fact
> that
> > > > >these
> > > > > > regulations were seen to be inhibiting the upward move of the
> markets
> > > > >should
> > > > > > have been a warning rather than a reason to remove the
> regulations.
> > > > > >
> > > > > > Earl >>
> > > > > >
> > > > > >
> > > > > > To unsubscribe from this group, send an email to:
> > > > > > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > > > > >
> > > > > >
> > > > > >
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> > > > > >
> > > > > >
> > > > > >
> > > > >
> > > > >
> > > > >
> > > > >To unsubscribe from this group, send an email to:
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> > > > >
> > > > >
> > > > >
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> > > >
> > > Rakesh
> > > > Sahgal
> > > >
> C
> > > > -165(1st Floor), Greater Kailash - I,
> > > >
> > > New
> > > > Delhi - 110 048
> > > >
> > > India.
> > > >
> > > Tel.:
> > > > 91-11-647-6462,91-11-643-0010
> > > >
> > > eMail:
> > > > rakeshsahgal@xxxxxxx
> > > >
> > > rsahgal@xxxxxxxx
> > > >
> > > >
> > > > Rakesh Sahgal
> > > > Online Status:
> > > >
> > >
> <http://eudora.voicecontact.com/vc3/index.html?rakeshsahgal%40eth.net><http:
> > >
> //eudora.voicecontact.com/vc3/index.html?rakeshsahgal%40eth.net><http://www.
> > > eudora.com/products/voicecontact/>
> > > >
> > > >
> > >
> > >
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> > >
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