November 19, 2003
of Pivotal Events started with "Change" as a title
and, at 6 pages, was lengthy. Once the change is in, we hope
to return to the 4-page format. Over the weekend and the past
two days, significant change seems to have started.
Because it includes a good weighting in banks, we have followed
the Topix as a proxy on the Tokyo stock market.
The high for the Topix was 1106 on October 20 and, at 972, it's
down 12% from a tested high. In so many words, it is in a modest
"Stair-Step" downtrend. However, within this, Topix
banks have set a big head and shoulders top, from which it is
breaking down. The Topix construction index has suffered a
As we have been noting, there has been a significant change in
Thai bonds relative to U.S. treasuries. Since October 7, this
spread has widened from 49 bp under to 87 bp over treasuries
and that is a fast move.
Since August, net money flows into the U.S. have decreased from
$49.9 billion to only $4.19 billion for the latest report (September).
Within this, there was $38 billion in as the Bank of Japan was
supporting the U.S. dollar. You don't need a CFA to calculate
that, without that feckless operation, it would have been a net
The dollar index has slipped below "support" at 91.
The Baltic continues its plunge and, at 4046, is down 11% from
the high on October 30.
Meaning: The widening of representative Asian spreads
and the breakdown of the Tokyo bank index suggests that another
financial crisis is brewing up. Sharply diminished flows into
the U.S. equivalently diminished liquidity.
Given the remarkable speculation over the past 13 months, another
global financial crisis is developing.