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This Is Asias Century

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In absence of the US consumer, Asia will stimulate their own domestic markets. Asia is not going to let America climb back to top of the fiscal pile using their money.

In absence of the US consumer, Asia will stimulate their own domestic markets. Asia is not going to let America climb back to top of the fiscal pile using their money.

Published in: Economy & Finance, Business

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  • 1. This is Asia's century James Vinall - Sunday, October 12, 2008 On 24th Sept when the S&P500 was at 1,186, I sent you my analysis of index targets based on my front line experience in Japan in 1990 and the NASDAQ in 2000. I forecast quot;the S&P500 to bottom out at around 835 (down 47% from the peak) in the short termquot;. On Friday, the S&P500 index reached a low of the day at 839.80. This is likely to be a medium term bottom, before we see a more orderly slide over the next two/three years to 630 which is 60% down from the Oct 2007 peak. As I said in my original geo-political piece before the technical analysis, this will change the world. Regulators failed to police the over-lending systemic risk of cheap money and little debt provision because of credit guarantee derivatives. They should know from history that investment banks should be treated like naughty children as they exist to make as much money as their staff can generate by any means, even if it is enormously destructive. Politicians should not seek to restrict market practices (like permanently banning short selling which would kill the valuable hedge fund industry), but overhaul failed accounting and financial control and risk measure rules. The investment bankers just made as much money as they could given the lax rules set by regulators. It is capital adequacy and debt provision rules should return to sensible levels, not shut down the ability to trade capital. What needs to happen now is government spending has to take over from collapsed corporate spending as the main driver of the economy, while confidence returns, which will take years. The government needs to get much more efficient to afford the necessary public works to keep people in work. Look around London , vast swathes of 1930's houses were built by the government for public housing in difficult times to put money into the economy. The cost will be high, and sterling will need to be devalued to keep domestic interesting rates low, but the cost of not spending will be worse. Desperate times needs bold (not desperate) measures. Watch out for Russia who are emboldened by no real international censure for invading Georgia and South Ossetia . In my mind this was a to test the response they might expect from putting military force behind a huge claim of oil bearing territory around the North Pole, now free of Arctic ice that can now be economically extracted. World leaders will have no appetite to fight Russia given their focus on more national than international affairs. Free markets and free trade are nice ideals that just went out the window in the name of national interest (European Union and Iceland are a case in point). Global trade on trust is being seriously eroded and we will have to return to letters of credit and goods inspections (by people like SGS) as executives are scared of not getting paid for goods delivered. It is going to be very interesting to see what happens to the US Treasuries owned out in Asia and how the Fed and the presidential candidates deal with it. This is Asia 's century as they have all the cash and will make the most of it. Best regards James Vinall