Asian Update Bangkok Thailand Nov. 10,1997
Copyright 1997 Coast Investment Software, Inc.
May be redistributed unaltered, in total.
6907 Midnight Pass, Sarasota, FL 34242 (941)346-3801 Fax 815-550-7370
E-mail cisinc@fibtrader.com http://www.fibtrader.com


The face of economic implosion has a different complexion when you're
sitting among friends and business contacts who are being relentlessly
pummeled by its effects. While I am used to dispassionately viewing economic
crisis on a monitor from my comfortable island home in Sarasota, for the
past week I have been in the midst of it as I move about Bangkok.

At this writing, the Thai Baht has fallen from 25 to the dollar to 40. While
I take advantage of this reality with each Baht I spend, the fear I see from
the hard working and responsible people around me makes me cringe.

No sector of this economy has gone unscathed.  The tin cups of the street
lepers fill more slowly and the highflying entrepreneurs and speculators are
having their luxurious penthouse condos snatched from them as quickly as
"short time" nightclubs process foreign customers.

The Business Day, Thailand's financial daily, has column after column of
Mercedes at auction bringing less than half their value, when and if there
are any bids!

As the free market works, some 30,000 taxies have fled the streets.  Those
who can, walk while others crowd already stuffed busses.  The reduction in
taxies would have been even more striking were it not for the considerable
number of banking and professional staff that have become taxi drives in
order to put food on the table.  Of 92 financial institutions 58 have been
shut down and more are on the way!

An unanticipated advantage of this nation's widespread catastrophe has been
the crawling rush hour traffic, a big advantage from the standstill
phenomena of just a year back.  It is said that total traffic volume is down
some 30%!  Street food vendor sales are thought to be off 50%.  When I asked
my former financial products distributor, a middle class hard working Thai
businessman, if this meant people were eating at home, he looked puzzled and
said "perhaps people are eating much less".  He is my former distributor
because he is no longer able to sell my products, they have effectively
doubled in cost!  This as well as other effects of the current economic
situation have put him totally out of work.  Now he's planning on going
abroad to search for employment. 

The stock exchange of Thailand (SET) has never faced a crisis of this
proportion. While measuring techniques (Chart 1) ably forecasted a likely
break from the high 1700 down to the high 400's no one in or out of power
believed it could happen, even as it unfolded before their eyes!  Stubborn
optimism, as well as gross mismanagement of financial matters went unchecked
even among warnings from the IMF.

In an effort to stabilize their currency, the Thai government lost such a significant 
portion of their reserves that they are essentially bankrupt.  Why did they bother?
Don't we know that devaluation helps exports and strengthens a country's
balance sheet?  Well think about this... Yesterday I had breakfast with a
representative of a large multinational pharmaceutical cooperation.  He said
imports had doubled!  "So they're buying more Valium to help weather the
storm", I coarsely remarked.  No he answered, imports have doubled in dollar
terms, and quantities have remained about the same.  It turns out that
hospitals have had to lay off nursing staff to help compensate for their
increasing costs.

The rational for the valiant but fatal attempt to stave off devaluation was
instituted to protect the country from dollar denominated debt.  Imagine the
effect if your home mortgage or business debt in the early to mid nineties
was denominated in yen, i.e. you had to pay interest on yen denominated
debt!  How much of your growth or hard won efficiencies would have
translated to wealth and how much would have gone to Japan Inc.  Now imagine
that happening in the midst of a capital implosion.

None of this means I have a problem with free market mechanisms.  I have
made a comfortable living from understanding and interacting with them.
Sure I've seen fellow speculators go belly up when they have failed to heed
their own indicators and I have been through a few scrapes myself.  I have
simply not seen the kind of destruction of wealth and fear of the future
from people who have so little control over the events that cause the
situation they find themselves in.

Money is imploding!  Deflation is causing the huge sucking sound that is
tearing wealth and prosperity from everyone.  First Japan, then Korea,
Thailand, Indonesia, Malaysia and now even Hong Kong and Singapore are in
the same vortex.  (More charts)

Our chief financial officer Alan Greenspan is inflation vigilant!  He sees
his lifetime goal of zero inflation at hand.  Mr. Greenspan take a look
behind you!

For those complacent soles among you who think the effect on the US economy
will be negligible, I've got news for you --WAKE UP!  A LEG OF THE ECONOMIC
TABLE WE ALL SIT ON HAS BEEN BROKEN OFF AT THE KNEE!

It doesn't matter if we crash from here or somehow manage to muddle through.
What does matter is that prudent speculation (the only kind that has
longevity) demands we exit overpriced assets.  Now!  Not tomorrow or next
week!  I'm the apostle of acting on retracements and I say unless you are
expert in this area, don't wait for one!  Then, watch what is likely to
occur from the sidelines or be ready to play the short side.  Our job now is
to nail down that 5 or 6% in bonds or money market funds and use cotton
baton to shield us from the dreamy-eyed that know not where they tread!

As if things are not bad enough, lets look at some likely future support
levels. Places where these markets are apt to visit before the devastation
is over. 

Joe DiNapoli is a registered CTA and President of Coast Investment Software
Inc (www.fibtrader.com). He is a widely traveled lecturer & trader for over
25 years.  He has most recently authored Trading with DiNapoli levels -The
Practical Application of Fibonacci Ratios to Investment Markets.  He is
reputed to have called the Dow top at 2700 in 1987 as well as predicting a
500 single day decline some months earlier.
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The following comments are not a part of this article and will of necessity
contain terms those of you familiar with my trading methodology will recognize.

In a deflationary environment, bonds should do very well.  A monthly OP
projects up to the 12903 level (p.187 Trading with DiNapoli Levels).  The
primary (*) monthly resistance Node was taken out some time ago which also
confirms higher prices. Watch out for a "Wash & Rinse" at the old highs
around 122. (Fib tactics DiNapoli Levels & The Trading course).

Fundamentally two things could go wrong.  Japan might repatriate huge sums
of money thereby dumping US Bonds or a financial dislocation could occur
from the extent of insolvency of the Asian region.  I think the first
scenario would just give us a great buying opportunity while the second
would be a real reason for concern. At fib Confluence resistance levels,
watch gold!.  If gold breaks through them to the upside, the world financial
system is in trouble.

On US stocks, I'm looking for a Double RePo on the monthly to confirm that
the party is over.  With all the glassy-eyed optimism out there and managed
news, it's likely a rolling top will occur, for distribution of more
equities to the public.  Look for Directional signals and negative trends to
support short sales.

TRADER JO  cisinc@fibtrader.com
www.fibtrader.com
VOICE 941 346 3801
FAX   941 346 3901
COAST INVESTMENT SOFTWARE INC.
6907 MIDNIGHT PASS 
SARASOTA FL. 34242