MarketVVizard's Market Thoughts

Top 870. Feb 4, 2004 1:01 PM

» MarketVVizard - Re: Re: The Beginning Of The End~~~

In response to message posted by Normxxx:

Another big pitfall I think a lot of people have overlooked is that China may go to hell in a hand basket (so to speak) if the US economy starts tanking. For some reason the China bugs seem to have dismissed this and feel like China will steal world dominance from the US. While this is certainly possible, it isn't likely in my opinion, nor is this notion "new". China bugs have been around for decades and the same case for China being made now has been made before (low cost producer, worlds largest population, skyrocketing demand for commodities, etc. etc. blah blah blah). Eventually maybe the China bugs will be right, but I remain a skeptic. Asia was booming in the mid 90's only to collapse in '97 and '98. Don't assume Asia is immune to the boom/bust cycles. If the US goes down hard, Asian demand for oil/gold/commodities could dry up in a heartbeat. As Hussman says, "that's not a forecast". smile I'm just skeptical and somewhat ambivalent.

If China's demand dries up after a serious US recession (or coincidently) it would be the perfect storm as far as deflation is concerned. A lot of raw material and commodity capacity is being ramped up now as a result of Asian demand, if that demand falls as new capacity comes to market, prices will take a beating.

-- posted by MarketVVizard

Top 871. Feb 4, 2004 1:23 PM

» Normxxx - Re: Re: Re: The Beginning Of The End~~~

In response to message posted by MarketVVizard:

China is actually a replay of Japan vs. the US in the mid to late '80s. Japan was going to be the behemoth of the 21st century. All of the management gurus were touting the 'Japanese Methods.'

One way or another, I expect China to do much less well starting this year. China is greatly overheating and the Government has begun acting to 'cool' things off (mostly by limiting loans). These things rarely work out precisely as planned. (Remember how Japan tried to 'cool' off in 1989?)

But I'll repeat what I said in the '80s: No country that relies predominently on foreign sales for its prosperity can rise to the status of number one!

The one saving grace for China is that they seem to have taken to heart what happened to Japan, and are vigorously promoting their own domestic markets. But per capita income will have to rise substantially before that can become a mainstay for their economy.

Right now, the Armageddon (aka, 'doomsday') scenerio is that the US dollar/economy collapses and the whole world goes down the tubes. So, we have the entire rest of the world rooting for us (except for Islam, who have Allah)!

-- posted by Normxxx

Top 872. Feb 4, 2004 7:05 PM

» Kirk - Re: Re: Re: Re: The Beginning Of The End~~~

In response to message posted by Normxxx:

China's big problems might begin when they take a look and find a few are getting rich while the rest of the nation is fighting for $2 a day type jobs.

-- posted by Kirk

Top 873. Feb 4, 2004 9:02 PM

» Normxxx - Re: The Beginning Of The End~~~

In response to message posted by Kirk:

'W' is going to make it easy for them. He is going to keep the jobs in this country by opening the borders to low cost labor.

As I recall, didn't the Chinese in this country start out that way by building the first transcontinental RR lines?

-- posted by Normxxx

Top 874. Feb 5, 2004 6:43 AM

» Kirk - Re: Re: The Beginning Of The End~~~

.
In response to message posted by Normxxx:

As I recall, didn't the Chinese in this country start out that way by building the first transcontinental RR lines?

Chinese from the West and Irish from the East coast.

If we let low cost workers work here, then at least they have to consume goods and services plus pay taxes here.

-- posted by Kirk

Top 875. Feb 5, 2004 7:40 AM

» MarketVVizard - China

[Interesting that this was just published in light of our discussion]

Reuters

China says steel, aluminium, cement overinvested Wednesday February 4, 7:43 pm ET

BEIJING, Feb 5 (Reuters) - China will curtail investment in its steel, aluminium and cement industries, saying a wave of new projects threatens the economy, state media said on Thursday. "China's production capacity in those sectors has outpaced forecast market demands, while the sectors themselves are characterised by irrational production mix, high input of raw materials, low yields and severe industrial pollution," the Xinhua news agency quoted Vice Premier Zeng Peiyan as saying.

-- posted by MarketVVizard

Top 876. Feb 5, 2004 7:47 AM

» MarketVVizard - Wal-Mart Sales Strong;

Wal-Mart Sales Strong; Profit View Cloudy
[Hmmm, they can't seem to make any money in Germany... wonder why? smile

]
Thursday February 5, 6:48 am ET

CHICAGO (Reuters) - Wal-Mart Stores Inc. (NYSE:WMT - News) on Thursday reported surprisingly strong January sales, but the world's biggest company said quarterly profits may reach only the low end of its forecast because of a new German tax law.

Bentonville, Arkansas-based Wal-Mart said January sales at U.S. stores open at least a year rose 5.7 percent, ahead of its forecast for 3 percent to 5 percent growth.

Total sales for the four-week period ended Jan. 30 reached $18.4 billion, up 14.3 percent from a year earlier.

"With January sales exceeding our expectations, we would have expected earnings per share around the high end of our previous guidance of 63 cents to 65 cents per share," Wal-Mart said in a statement.

However, Wal-Mart said fourth-quarter earnings would likely be "around" 63 cents per share. Analysts, on average, were expecting 63 cents per share, according to Reuters Research, a unit of Reuters Group Plc.

Wal-Mart has previously used the word "around" to indicate that results could be slightly above or below expectations. A spokeswoman could not immediately be reached to comment on whether that was the intended meaning this time.

The retailer said fourth-quarter results would likely be hurt by a German tax change that became effective in January 2004, which Wal- Mart said prompted a re-evaluation of how much it could recover of deferred tax assets related to its money-losing German operations.

-- posted by MarketVVizard

Top 877. Feb 5, 2004 7:59 AM

» Austrian - Re: Re: Re: The Beginning Of The End~~~

In response to message posted by pbradford6:

First, to say that I will forget them is a drastic overstatement. I continue to follow the economy and markets. I would change my strategy if the doomsday scenario looks prevalent.

If Austrian is correct and commodities are the place to be, does that hold true with residential real estate? I would like to believe in Austrian’s prediction so that I can purchase a more substantial home. Austrian, how about giving me a guarantee that residential property will continue to rise?

I do not know, but am inclined to think residential real estate will correct substantially when interest rates rise. I did buy a "McMansion" as a life style choice (not an investment) in 2001 believing I bought at the top. Clearly I was wrong as the market for homes is still hot.

Related to this discussion regarding commodities, gold... and old posts on hegemonic decay...

http://business-times.asia1.com.sg/story...

Business Times - 03 Feb 2004

OPINION
Japan just can't switch to gold - yet

By ANTHONY ROWLEY

WHETHER a studied statement, an off-the cuff comment or a veiled threat, Japanese Finance Minister Sadakazu Tanigaki's suggestion last week that Japan could diversify part of its huge foreign exchange reserves into gold has had international reverberations.

It has brought home once more the fact that the vast dollar reserves which Japan and the rest of Asia hold are a Sword of Damocles for the dollar and the US Treasury market. The impact of such a move on the dollar would be severe. And as Japan has a third of total US Treasury securities held outside the US, the impact on the bond market would also be severe.

Mr Tanigaki's statement (in answer to a question in Parliament) that he felt it necessary to take a view on the future composition of Japan's foreign exchange reserves (the bulk of which are in dollars), and that this might include a review of gold holdings, comes at a time when other Asian nations have been expressing concern about their vulnerability to the dollar. It also occurs when Asian central banks (the People's Bank of China for one, an informed source told BT) are expressing strong interest in gold.

Asian monetary authorities are working too on laying the foundations for an Asian Bond Market which would provide the infrastructure through which the region could reduce its dependence on the dollar and the US Treasury market, and provide a means for the region to deploy its own savings without channelling them offshore.

Mr Tanigaki's comments were thus timely even if, as a senior Japanese Ministry of Finance official claimed to this correspondent, it would be wrong to infer any immediate action on Japan's part. There is, in fact, a powerful argument why Japan cannot move out of dollars for the time being. This is because it needs to buy dollars, rather than sell them, so long as it pursues its current policy of also buying economic recovery through exports. The MOF spent a record 20 trillion yen (S$321 billion) last year in propping up the dollar against the yen and in the first month of 2004 alone it has spent an incredible seven trillion yen more.

The dollars it acquires are then invested back into securities of the dangerously indebted US government. This is an absurd situation, rather like a shopkeeper lending ever larger amounts of money to an important customer who is also a profligate spender, so that he can maintain consumption. The customer signs ever-increasing amounts of IOUs or bills and the shopkeeper has decreasing faith in these. But he cannot sell them so long as he retains his dependence on keeping the customer happy. It is a delicate and dangerous balancing act, and one might wonder why a Japanese finance minister should risk upsetting it, as Mr Tanigaki did.

It may have been pure naivety. But it would be dangerous to bank on it. This is not the first time that Japan has issued veiled threats to the US that it is capable of retaliating if the exchange rate weapon is deployed (as Treasury Secretary John Snow appears to be doing now through his policy of benign neglect for the dollar).

There was an occasion in 1996 when former Japanese prime minister Ryutaro Hashimoto pondered out loud during a visit to New York about what might happen if Japan were to reduce its (even then) large holdings of US dollar securities. Washington appeared to get the message and the severe upward pressure that the yen had been subjected to eased off. Mr Tanigaki, according to some schools of thought, may have been issuing a similar veiled threat ahead of this week's G7 finance ministers' meeting in Florida.

Alternatively, the minister may have been floating a trial balloon to see what impact it would have on the gold, foreign exchange and US Treasury bond markets. As it happened, very little, even though as UBS commented, Mr Tanigaki's remarks may be the biggest story in the official gold sector for many years. The dollar paid more attention to hints by the US Federal Reserve that it could raise interest rates sooner rather than later. The Treasury bond market also seemed too preoccupied with domestic events to notice the remarks.

The fact is, however, that at some time the threat of Asian governments running down their colossal dollar holdings (which constitute the bulk of the US$1.9 trillion of official foreign exchange reserves held in Asia) is going to crystallise. It could happen if Japan's economy is moving, as some economists suggest, beyond total export dependence towards a broader-based domestic recovery. Or it could happen if rising US interest rates stall growth and demand for imports. But happen it surely will and reshaping the dangerous structure of mutual dependence between East Asia and the US should be top of the agenda for the G7.

-- posted by Austrian

Top 878. Feb 5, 2004 11:05 AM

» Normxxx - Bank Credit Analyst Chimes In On Inflation

When Will U.S. Inflation Rise?

2004-02-05 08:41:00

U.S. inflation is near a cyclical bottom and should edge higher as the year progresses, triggering the first Fed rate hike during the second half of the year.

Our forecast model for the Fed’s preferred measure of inflation, the personal consumption expenditures core price index, suggests that dollar weakness (which pushes up import prices) and the high level of oil prices (which eventually leaks into overall prices) will gradually outweigh the effect of lingering economic slack, allowing inflation to creep higher in the second half. The rise in inflation will only speed up once the output gap closes by yearend (our estimate). Even a modest rise in core inflation will be an important signal to the Fed that economic slack has been eliminated and a super-accommodative monetary policy is no longer needed.

-- posted by Normxxx