Wednesday, December 07, 2005

Asia Markets: Nikkei reobunds as Asian markets rise - Markets/Exchanges - Market News

Japan is in the early stages of an exporting boom. The yen is at multi-year lows against all major currencies and the central bank is holding short rates steady. If you can't find a US stock to buy, you might consider the Sony's of Japan. The big exporting companies are going to do well even after considering any additional declines in the currency.

By the way, the r square relationship of Japan to the emerging growth countries is not nearly as high as the r square between Japan, Germany and the US. In other words, it is the developed nations turn to produce capital goods to sell to the rest of the world.

The US trade deficit is not about to disappear but the growth rate will slow. The trade deficit will not disappear but it will get whittled down in size relative to total GNP. When a country like China orders 18 Billion Dollars of Boeing planes, it has to sell a lot of underwear to Wal-Mart to replace the cash. The continuing purchase of parts and service on these planes are "big tickets"! By the way, the profit margins on these planes are substantially higher than the profit margin on the underwear.

IBM and other "biggies" are chomping at the bit, ready to collect a bundle of US dollars that have been exported. These dollars have a home. They can travel far and wide and visit a lot of places but they must eventually come home.

Ironically, part of the shift that is in process will be the diversion from some of our dollars to Japan and away from the emerging growth countries. This will be an intermediate term phenomenon. Reality is that the total market cap of the worlds stocks will continue to grow faster outside the US, as it has for many years. Citizens should always remember that free trade is a win-win. US wealth has been increased dramatically though open trade. The majority of Americans benefit as stock holders and or as employees of profitable companies.