Warren Huang,
OSA Intl Operations
Analysis San Francisco, Ca., USA website www.osawh.com
Box 130, 706, Sacramento, San Francisco, Ca. , USA, wh3928@yahoo.com / osawhh@citiz.net
Tel: 1-510-524-4484
* The author was associate professor
at Taiwan University Full Professor at
Tsinghwa and Tunghai University in Industrial Economics, Global Strategic
Management and Chemical Engineering , lecturing China Peking, Tsinghwa, Fudan ,
Zechiang, Jiaotung, Dalian Univ. EMBA, Economic Management, Business /Financial
Research Center.
Abstract
Develop global macro , monetary, financial economics, industrials market
economy information knowledge base
Mathematical quantitative
Methodology: Thousands structural dynamic Operations Simulation
Analysis (OSA) of demand side monetary economic tracking monetary, economic,
fiscal policy, WTO impact on macro economics, financial economics daily financial market interest rate, currency, commodities,
properties, commodity, natural
resources, assets prices market
forces simulation with average error below 1.5 %, correlation above 0.9.
supporting government and business
strategic investment and supply
chain cost reduction maximize China, US, Taiwan economic , banking, finance,
enterprises reform for sustainable
growth and price stability control.:
Spend full time in China,(1994-98)
Taiwan ( 1984-95 ) offered thousands lectures/workshops to hundreds
banking, securities companies CEO,
and security commission, stock exchanges
executives, 15 cities TV, radio 30 million investors CEO,, executives, traders tracking causes, onset, recovery , early warning
of Asian financial crisis, high tech venture capital investment
risks and supply chain
strategy, risk management.
He has been invited by China, Taiwan,
Asian, US 24 central bank governors
,financial risk management conferences to speak on the subject , millions global government,
banking, finance, SOE, executives visited
his website www.osawh.com since 1998.
applied to maximize US, China, Taiwan
board members, management , investors
corporate governance performance
training, avoided banking reform
in trillion dollar NPL market loss,
saved billion dollar supply chain costs and supporting 300,000 Taiwan importer/exporters, global
currency, WTO competitive pricing strategy
He Trained 500 senor industrial economics, global strategic management students tracking 50 countries
macro/financial economics, wrote thousands articles for Taiwan , China government
economic, finance newspapers, investment, trade journals.
Prof.
Warren Huang, Short Resume
Monetary, Economic, Fiscal Policy, WTO Impact on China/Global Financial Crisis and Macro and Financial, Asset Prices, Bubbles
Early Warning Simulation
Warren Huang, OSA
Int'l Operations Analysis San Francisco, Ca., USA website www.osawh.com
Box 130, 706, Sacramento, San Francisco, Ca. , USA, wh3928@yahoo.com
/
osawhh@citiz.net
Tel: 1-510-524-4484 Fax:
1-510-524-0283
* The author was associate professor at
Taiwan University Full Professor at Tsinghwa and Tunghai University in
Industrial Economics, Global Strategic Management and Chemical Engineering ,
lecturing China Peking, Tsinghwa, Fudan , Zechiang, Jiaotung, Hua-zhun Science
& Tech, Dalian Univ. Chemical Eng., automatics control, EMBA, Economic
Management, Financial & Business Research Center.
Abstract
A.. Develop global macro , monetary, financial economics, industrials market
economy information knowledge base
B. Methodology: Thousands structural dynamic Operations Simulation Analysis
(OSA) of demand side monetary neoclassic economics tracking monetary, economic, fiscal policy,
WTO impact on consumer, business
spending, macro economics, daily financial market interest rate, currency, commodities,
properties, assets prices market forces simulation with average error below 1.5
%, correlation above 0.9.
Applications:
US multinationals strategic simulation
for board members, management decision analysis, Taiwan economic affair,
planning, energy policy, oil/petrochemicals companies investment, strategic
planning, supply chain, weekly 100
countries currency, trade, pricing
strategy for SOE privatization, IPO, M/A performance
Spend half time in China, Taiwan offered
thousands lectures/workshops to
hundreds banking, securities
companies CEO, executives, 15 cities TV/radio 30 million investors tracking the
causes, onset, recovery of Asian financial crisis impact on global/China macro, financial economic, financial markets asset
prices bubble simulation for investment strategy, corporate scandals, NPL early
warning risk management; presented to
China, Taiwan, Asian, US central bank
governors policy, financial economics risk management conferences; millions
global government, banking, finance, SOE, executives visited www.osawh.com
Trained 500 senor industrial economics,
global strategic management students
tracking 50 countries macro/financial economics, wrote thousands articles on
Taiwan , China government economic, finance
journals, newspapers, investment, trade journals.
Introduction
:Economic Reform : Demand side monetary economic simulation tracking global
macro/financial, industrial/ trade market economy, and wealth effect, bubble
burst. ( Fig. 1 )
China economy is facing structural changes after joining WTO, from closed planning economy to open world
market economy as China opening its
domestic banking, financial and consumer products markets and cut or eliminate
import tariff duty protection. Although
China is benefited by 50 billion dollar yearly
foreign capital inflow into these
markets and associated technical and management know-how, it
will be a integral part of global
economy , financial markets with
numerous opportunities and volatility risks of daily global markets
price movements. Chinese government, business, SOE, medium, small enterprises
and academics must speed up strategic reform and change
management with modern market economy concept, management procedures,
and reliable, rational knowledge based decision analysis for the
transition process of reforms to
cope with fast changing
global markets dynamics.
Global
economy and financial crisis are facing
asset bubble burst, financial
crisis resulted trillion dollar market loss, nonperformance loan every two to
three years since 1987 due to the government, banking, financial markets
decisions makers rely on speculation on
supply side economy and statistical models based on 3
month old economic, business data or the instant internet news , following the crowd, chasing
the market resulted overheated asset bubbles built up and bursts every 3 years. They failed to address to the
real causes, onset of the bubble burst through structural dynamic modeling
tracking the causes and responses of the market forces demand and capital market asset prices movement.
This
author spend 30 years tracking the real causes of new economy bubble bursts, old
conventional economy fade due to misled
by supply side over-optimistic economists,
excessive business investment, inventory to improve productivity, product, and market innovation, ignoring
peaking off consumer, business
demand resulted overcapacity,
price and profit and stocks prices slump, piled up trillion
dollar market loss and bad loan. With
the advancement of internet based
e-finance, e-investing, e-credit, and highly risky trillion dollar structural finance derivatives
markets providing instant online
information for deposit, transfer, credit and stocks trading without reliable demand side decision
simulators forecast the future trend,
leaving the investors follow financial markets analysts optimistic over
2000, pushed all time high in high tech stock prices bubble, ignoring
interest rate hikes resulted cool off in consumer, business
demand leading to earning decline and bubble burst, stock prices plunge 90 % in
upstream/downstream Information Technology
(from venture capitals investment , IPO, M/A , dotcom to software, chips, PC,
telecommunications, fiber optics ) all simulated, warned by
this authors’ lectures on 24 global (US, ECB, Asian China, Taiwan)
central banks governors and macro,
financial economic conferences
since 1998. ( Huang, 1-24) Trillion dollars loses in US and Asian stocks market
loss could have avoided and billion dollar supply chain costs could have saved
by these demand side monetary economic simulation of market forces
Submitted to Third China economic annual conference , Shanghai Dec. 20-21-2003
prices
movement in global market economy, to
be presented and in the conferences.
This author has spend most of his time in Taiwan, ASEAN, Asia( 1980-
1996) and China, Hong Kong(1994-1998
with Ji in China), and US, in developing, implementing thousands
dynamics Operations Simulation Analysis(OSA) of global central banks monetary, economic,
fiscal policy, oil prices WTO impact on
daily China, Asian, US, European and global macro economy boom and bust cycle, wealth effect,
industrial assets prices, bubble burst and daily financial markets
normal, crisis dynamics during 1980 and 2003
for supporting daily global government, banking, securities, insurance,
state enterprises reform, multinational, SOE and medium, small enterprises
privatization, IPO, merger/acquisition strategic investment risk , financial
crisis, corporate cost, financial accounting
tracking, board members, management teams, investors training for
corporate scandal early warning and supply chain cost reduction strategic
management, avoided trillion dollar market
and NPL and saved billion dollar supply chain costs in each crisis,
bubble burst since 1980.
Global
macro/financial/industrial /trade economic interaction and impact on capital
market asset prices bubble
Monetary
Policy Impact on Global Economics , Banking, Financial Crisis, Systems Risks
OSA Simulation:
These
banking and finance knowledge based
expert systems will provide the global central bankers reliable decision tool
in daily what, when and how of monetary policy tracking on the response of impact on macro economic inflation, GNP, and
financial money, currency, stocks, bond, financial derivatives markets normal
and crisis discontinuous risks behavior and derivatives markets risk management
This paper will discuss the development and
implementation of Neoclassical Economic Synthesis monetary economics approach
of Paul Samuelson, Milton Friedman . Thousands of simulators tracking,
simulating central bankers monetary policy and various external shocks (oil,
commodities prices, government fiscal, bilateral, multilateral currency crisis)
impact on GNP, inflation, major economics performance indicators, financial
markets interest rates, currency rate, commodities, corporate profit margins,
bond, stocks, derivative prices. These deterministic state form simulators
tracking the financial markets risks down to the simulation of portfolio and
industrial products prices level Without any prior knowledge of probabilistic
distribution. Which is further improvement of current VAR and US Fed FRB/US and
FRB/Global models applications to US inflation, GNP, Dow Jones Index, Fed fund
rate and 30 yr. T-bond yield, financial future prices simulation will be demonstrated
for US fed monetary policy impact simulation.
A: Root Causes of
China, Asian and US, EURO Economic, Business Cycles Boom and Bust, Financial Markets Crisis, Risks Simulation :
These
real time dynamic simulation systems tracking successfully the root causes of a
1980, 1990, 2000 global economic bubble
boom and busts and global currency, stock market crash ,financial, banking
,energy crisis since 1987 and 1994 China
runaway inflation, 1997-98 Asian financial crisis associated risks came from excessive
government fiscal, central banks monetary policy and excessive business
investment and global players hot money
investment in equities, properties market speculation resulted soaring
properties, stocks prices, labor costs and associated asset bubble, wealth
effect in Taiwan, Japan, China, Asian (over 18 trillion dollar wealth generated in US 1994- 2000) led to soaring consumer, business
demand, rising oils and commodity prices, imports costs, declining export,
shrinking trade surplus or widening trade, current account deficit and
overpriced currency and properties, equities prices bubbles, and eventual
markets crash and crisis after series interest rate hike tightening the money
supply reduce the inflationary pressure and associated social unrest..
B. Simulation of the Onset of China,
Asia, US, EURO Currency
Crisis:-Instantaneous releasing overpriced stress
These
simulators tracking the real causes and the onset of the 1992 European, 1994 China, 1995, Mexico, 1997
Thailand, 1998 Korea and Indonesia
Russia, Brazil currency, financial crisis, at moment widening trade deficit (approaching
one billion monthly) and current account deficits lead to overpriced currency and the onset of currency crisis: currencies
plunge more than 50 % to release it's
overvalued stress, returned to new rational equilibrium. UK and Sweden, Italy suffered currency plunge
1992, due to widening trade deficit .
while Thailand, central bank float the Bhat (has been fixed at 25 for 4 years),
in July 1997, it plunge to 50, S. Korea in Nov, Won plunged from 1300 to 2100, and Sept, 1998 Russia float the
ruble, and 1999 March, Brazil float it's
Real and 2002 Argentina float its Peso,
plunged from 1.0 to 3.8 ( all onset at
one billion US dollar monthly trade
deficit and soaring current account
deficit,) the currency take the plunge
as shown in the simulation charts in the conference), and Singapore dollar,
Taiwan NT dollar dropped 30 % reflecting shrinking trade surplus and turning
into trade deficit. US dollar plunge to 102 Yen from 147 at the time Greenspan announce interest rate
cuts in winter 1998, as it's trade
deficit soared to 26 billion and dollar plunge from 0.9 to 1.17 against
EURO due to import demand , tripled oil prices resulted
widening trade deficit to 41 billion and widening current deficit due to high
Iraq war cost in early 2003. While China enjoyed 30 % growth in export and
soaring trade surplus with 346 billion foreign currency reserve and 52 billion dollar foreign capital inflow
its RMB currency is facing appreciation pressure. However, concern of China high unemployment rate and 500 billion dollar nonperformance loan
leading to central banks maintaining RMB at current
stable trading range ( any major appreciation of RMB leading to export
decline may result currency depreciation and inflation)
C.
Simulation of The Onset of Global Stock Markets Crash Crisis Dynamics:
releasing overpriced stress
These global stock markets dynamic
simulators track instantaneous markets
reacting to rising interests rates, credit tightening ( to fight inflation and
stabilize the currency, created credit crunch. The currency and stock markets
crashed to it's rational level, to release it's overpriced stress to new
equilibrium resulted trillion dollars
loss . Global financial market analysts have short memory on the
interest rate hike impact on stock prices despite interest rate hikes lead to Asian crisis which Thailand raised interest rate to 25 %
to stabilized Bhat at 50, took the Bangkok SET index plunge 70 % from 1000 to
300, Hong Kong raised it's short term interest rate to 19 % to defend it's HK
dollars stock to US dollar, took the Henseng index plunge 60 %(from 12500 to 6200),Singapore raised
interest rate to 12 % to stabilize the currency, Singapore Strait Times drop 60
%, Taiwan Index down 35 % . US Dow Plunged from 11300 to 9600 , Nasdaq from 5100 to 2200 in late 2000
after 6 US rate hikes and EURO stocks retreat 15 % reacting to US Fed
and ECB interest rate hikes to cool-off the overheated US, EURO stocks
bubble in internet and biotech and
housing, labor markets due to wealth effect created excessive consumer,
business demand. Similar crisis onset in 1987 US Dow Jones, 1990 Japan cut
money supply from 13 % to 5 % to cooloff the bubble economy due to soaring
stocks, housing markets, took Nikkei plunge 38000 to 20000; Taiwan raise
interest from 6 % to 14 % took stock plunge from 12400 to 2400 in 1990 and in
1992 European currency, crisis took stock plunge 40 %, 1994 China runaway
inflation caused by 100 % currency depreciation, Shanghai A index plunged from
1500 to 333, reacting to doubled interest rates hike and Mexico crisis peso and
stock market plunge 50 % Brazil index plunged from 8500 to 5400 reacting
interest rate hike from 40 % to 70 %
D. Simulation of the Spread and capital out flow, banking default of EURO, Asian and Global Currency Crisis:
Thousands expert systems based simulators
tracking, simulating the causes and spread of the past major global financial
market currency crisis, FDI capital In/outflow, banking default and risks in
the last 20 years are due to global central banks and financial markets
decision makers. The spread of global financial , currency crisis and default
risks are caused through excessive central banks money supply followed
by global players capital inflow speculating the overheated currency and
stocks markets and outflow created
markets plunge resulted nonperformance loan and credit default(simulation
results shown in the conference demonstrated the spread of UK, EURO currency crisis in 1992, Thailand currency plunge spread into ASEAN
country, Hong Kong, Taiwan, S Korea, Russia default resulted LTCM into US and
EURO , Brazil and Japan and this year s
trillion dollars market loses in US, Taiwan, Korea are of poor investment strategy in US and Asian stocks (especially chasing the IPO, M/A shares caused corporate
accounting scandals and manufacturing industries excessive investment and
inventory caught in excessive money supply and global short term capital (hot
money) inflow resulted overheated bubble
economy .
Global
currency crisis are all caused by skyrocketing properties, stock prices and
labor costs, declining export, widening trade, current deficit,(with one
billion trade deficit) Indonesia, Russia were complicated by internal political
turmoil, resulted global player pulling capital outflow resulted currency,
stocks, properties prices plunge .
E.
Simulation of Global Monetary, Economic,
Fiscal Policy, oil prices Impact on Recovery of Asian and Global Financial
Markets asset bubble burst Crisis:
These
systems tracking, simulate the IMF rescue plan progress results and the
recovery of ASEAN, Asian, Russia, Brazil and LTCM betting on the wrong of
interest rates(US T-Bond and Fed fund rates) and bond yield spreads. And
predicted US Fed three interest rate cuts lead to fast US and Asian stock
market rebound and economic recovery:, reduce the interest
rate spread ,took the pressure off Asian currency , dollar tumbled from 147 to
111 While most ASEAN and Asian troubled country benefited by high interest
rate, falling commodities prices, reduced domestic demand, imports, cheap
currency lead to soaring export and trade surplus(S. Korea has 40 billion ) and
soaring export growth, are able to cut interest rates to the pre crisis level.,
and maintain stable currency, lead to stock markets more than tripled S. Korea
already lead the recovery enjoy 11 % GNP Japan has 9 % GNP growth, Thailand, Hong Kong,
Singapore return to 10 % growth., China made soft landing announcing rate cuts as inflation return to 6
% and increasing money supply in early
1996 ( predicted by the author 1994 in China newspaper) , Shanghai soared from
530 to 1600, GDP back to 8.1 %. Taiwan
back to 7 % growth getting out of recession and deflation ..
These systems predicted on May 1999
Macao's central banks policy conference the
first US interest rate hike to
fight domestic inflation due to soaring
oils prices and 5 other interest rate hikes in the author's
16 int'l conferences later
These systems accurately predicted US and EURO 1999 last quarter excessive money supply for Y2K resulted soaring global stocks and housing markets(asset bubble), resulted wealth effect led to runaway consumer, business spending debt resulted labor shortage forced Greenspan took series interest rate hikes in 2000 to cool-off the stocks, housing markets, reduce consumer, business demand. These simulators accurately predicted in early 1999 that global financial markets analysts overoptimistic over second half 2000, 2001, 2002 recovery and again predicted July 2001 to China Peoples Bank banking, finance executives in Beijing that US economy facing recession and May 2002 on Global Corporate Governance Conference in Peking University that US entering recession and deflation despite US rate and tax cuts and global stock will follow US stocks crash 30-50 % , Dow will test 7500, Nasdaq test 1150, Taiwan test 3500, with global high fliers internet, biotech IPO stocks plunge 50 % to 95 % .
Currently
US and global stocks are overheated again by economists, market analyst over-optimistic
over 2003 second half recovery, will
facing deflation threat and correction.
Teaching
and Executives MBA Training economic thought and Mathematical Simulation
Methodology
Goal Mission,
Performance oriented multidisciplinary
strategic Operations Simulation Analysis(OSA) strategic and execution teams for
School of Economic Management, e-MBA
strategic reform, change management
Academic
University Teaching and Research:
The author
has offered OSA methodology and
systematic analysis to train 1000 senior/graduate chemical engineering,
Macro/industrial/Financial economics,
global strategic management, operations
research students. Each student is assigned one country, to collect information
knowledge base for last 20 years
macro/financial/trade/industrial
economic data from IMF monthly statistics, daily Wall Street Journal, Business Week and local news papers, and then applied OSA simulators tracking macro economic indicators, daily currency, interest rates, demand, prices for Fig 1. economic interactions and set up 3- 4 member OSA team for process simulation and economics feasibility simulation.
Each
student will present models for
currency, prices forecasts and
comment on Wall Street Journal
articles analysis for final
examination. ( this approach is recommended by Tokyo World Congress and
Washington DC, Dallas Chemical
Engineering
annual meeting as the most creative teaching, training methodology for the new millennium.
Business
Economics :Global banking, finance CEO, government executives, EMBA on the job
reform, strategic banking, enterprises reform change management decision analysis workshops
Thousands
OSA strategic investment, supply chain logistics decision simulators have been
used as on the job CEO, executives
training simulators for thousands CEO
executives problem solving on the job
decision analysis workshops for millions
China, Taiwan, Asian, US, European CEO, VP, executives reform, change
management implementation since 1984.
The
author have offered thousands lectures on
pioneering work of two master
hands controlling global economy cycles and financial market prices,
investment strategy and risk management on banking, enterprises reform, SOE privatization,
IPO, merger/acquisition performance improvement to China 15 cities (Shanghai,
Beijing, Shenzhen, Taipei) 30 million TV, radio investors, financial executives
since 1994.
Monetary Policy Impact on Global Macro
Economy and Financial Markets Dynamics OSA
What is OSA and what OSA has
accomplished in crisis and risks simulation and management
OSA (
Operations Simulations Analysis),
pioneered by the author is an extension of Operations Research, a
powerful systematic approach for the development and implementation of problem
solving and decision analysis tools, applied extensively by the US defensive
and aerospace industries using artificial intelligence pattern recognition,
nonlinear stochastic process filtering and control for the Apollo moon
landing guidance and control in the
1960's. As the author extended his PhD dissertation 1971, on “ Nonlinear
Adaptive Kalman Filtering and Stochastic Control with application to chemical
reactor control and econometrics: to knowledge based processing plant design
and operations optimization and control, safety, explosion risk management ,
global investment risk, marketing and sales management in his association with Mobil, AMOCO, Phillips Petroleum, Rhone-Poulenc,
Bechtel's , Bailey Network Control US
headquarters and Taiwan, China
government, banking, finance, State Enterprises, medium , small enterprises reform, strategic investment,
supply chain cost reduction..
Development and implementation
OSA/Global and OSA/US simulation systems
He started the daily US Wall Street activities and global financial markets
dynamics simulation (including normal stable continuous and crisis
discontinuous data ) in 1972.
Starting 1984 he develop,
implemented thousands of knowledge
based China, US, EURO, European, Asian
Pacific, Russia, South America central bankers monetary policy and financial
markets simulators through applying
Artificial Intelligence neural net, fuzzy logic, chaos algorithms out of last
20 years IMF statistics and daily US, Asian, European Wall Street Journals and
Taiwan, China, Hong Kong's daily financial markets news papers, trading and
corporate earning data(including normal stable continuous and discontinuous
crisis data) combined with training and feedback from workshops and daily
lectures to 30 millions China, Taiwan 15 cities TV, radio investors, banking,
finance CEO, CFO, managers, traders, investors market psychology and his lectures to 24 global central bank
governors and financial risk management
conference (including China Peoples Banks governor Dai in Macao May 1999
and Taiwan, Japan , ASEAN, US, Europeans integrated into the Neoclassic Synthesis and
Milton Friedman demand side monetary economic theory. It pinpoints each
financial market crisis one to three months ahead beforehand by simulating the
global central bankers daily money market operations and it's impact on macro
economic GNP, inflation and trade economics, commodities, industrial raw
materials, products demand and prices, financial economics interest rates,
currency exchange rates and corporate operating margins, US, European, Russia,
South America stocks and bonds, commodities, financial futures and derivatives
(call/put option, warrants) prices. Which have been tracking, simulating last
20 years daily US, Global and Euro countries financial markets operations and
crisis, risks in central bankers, government policy risks, trillions dollars
global financial institutions credit risks due to poor credit rating simulation
in Asian crisis investment, resulted bad debt, trillions dollars equity markets
trading loses and NPL, corporate scandals due to betting on the wrong side of
financial markets investments ( currency, stock, bond, financial future,
derivative and corporate merger/acquisitions and investment, procurement,
market shares risks.. These systems extended US FRB/US and FRB/Global models to
the monetary policy impact on portfolio prices, interest rate, bond spread,
currency and derivatives prices level, provide direct tracking of global
monetary policy, oil prices impact on interest, currency, commodities, stocks,
bond, and its derivatives prices)
Monetary Policy impact on Structural
Financial Derivatives for Global Strategic Cost Reduction and Risk Management:
Almost 100 trillion dollars have been traded for commodities, and financial
derivatives extensively by the global financial industries for oil, gasoline,
heating oil, raw material costs,
interest rate, currency, asset securitization
and markets risk reduction management, while hedging fund have exposed
to seven trillions dollars on the leverage fund management, which all relied on
the current unreliable risk and options models, which required probability
input and betting on the wrong side of the interest rates, currency and stock,
bond prices. This paper will present our options/warrants prices models are
much simpler and more reliable than Black-Schole formula. Since it provide
direct tracking, simulation of central bankers monetary policy impact on
interest rate, currency, financial, commodity futures prices , corporate profit
margin and stock prices simulation forecasts one to three month ahead and
integrate into the financial derivatives call/put options, warrant calculation(
striking price, date to expiration, and the simulation of current prices).
Global Central Banks Monetary Policy, Oil prices shocks Impact on Macro
economics Risks Simulations
Monetary
Policy for Sustainable Growth and price stability control : OSA-Global Asset Price Bubble Burst Simulation
Dynamic tracking simulation of last 20
years US, Japan, China, Taiwan, Hong Kong, Korea, ASEAN, Russia, South America,
European stocks, properties prices impact on consumer and business spending,
macro economics GDP performances, to predict, forecast overpriced asset prices
resulted consumers spending imbalance and business profit slump, leading to
bubble burst and abrupt change in consumer and business confidence caused stock
prices plunges with average error below 1.5 %, correlation constant above 0.95.
These deterministic, dynamic simulation of last 20 years global asset prices,
and economy boom and bust of the asset bubble vicious cycle of excessive monetary policy, low interest rate induced
sustained long term bull markets stocks prices gain caused consumer and
business spending in real estate properties pushed soaring housing prices and
rent. And deficit spending (negative saving) in stock markets, pushed the stock
s even higher, until abrupt reverse of consumer and investor confidence --the
bubble burst- plunge of stocks and properties prices as it happened in US,
Japan, Taiwan in 1980, 1987, 1990, energy crisis, EURO 1992 currency crisis,
1994 China runaway inflation, 1995 Mexico crisis, 1997-98 ASEAN, Japan, Korea,
Russia, Brazil currency crisis, 2000 (
IT and biotech bubble burst ) all caused by overpriced stock prices due to
excess monetary policy and high
consumer, business demand and GDP
growth
William
FRB/US and FRB/Global model provide only
Monetary policy impact on US and global macro economy and financial
markets However, the following OSA approach
rigorous simulators ( nonlinear multivariate ) have been tracking
successfully 100 IMF members countries central banks monetary policy impact on global economic boom and bust cycles.
Inflation rate = F (Money supply growth
rate %, Commodity index, consumer spending, Dollar exchange rate)
GNP = F (Consumer spending growth rate %, Interest Rate, Export Growth Rate)
Property
prices = F (Money supply growth rate %,
Interest Rate, stock index)
Wealth
Effect = F( Money Supply, Property prices, Stock Index)
Consumer spending = F( money supply growth, interest rate, unemployment rate )
OSA/China
Macro economy and Financial Markets Application:
How China avoided 1994 Financial Crisis
and made soft-landing and 1998 Asian
Financial Crisis Simulation:
This author with Dai and Ji , spending half time in China during
1988 - 1998 implementing these relationships tracking Taiwan, Hong Kong and
China peoples banks monetary policy impact on inflation and GNP and interest
rate, Taiwan and RMB currency and stock markets prices. It accurately tracking
and predicted daily China economy and financial markets activities, how
the former Prime minister Zhu Rongji successfully
managed China's monetary policy led China avoided possible financial crisis by
successfully controlled the inflation, to bring it down from 35 %
inflation and 100 % currency
depreciation in 1994 to 15
% money supply, 6 % inflation, stable currency , soft landing in 1996 which
lead to Shanghai stock index plunge from 1994 peak of 1550 to 333 and
stabilized traded between 600 and 800 during 1994 and 1996 through three stages
credit tightening to cut the domestic demand and reduced the import duty by 30
% to reduce the importing inflation and implemented stock markets and financial
institution regulation and full transparency, ban short term foreign capital
speculation in the housing and stock markets achieved perfect soft-landing in
1996. And also predicted 1996 interest rate cuts leading to bull markets, with
Shanghai A index tripled from 520 to 1650 . ( all predicted by the author on
and national newspapers, lectures to 20 million
15 cities TV, radio programs
investors and training nationwide hundred banking, securities companies
CEO during 1994- 98 .The state enterprise reform and Asian crisis resulted high
unemployment and export slowdown, pulling the money supply down from 1996 28 % to
11 % in 1999, drag into deflation
and GNP from 9.5 % to 7.1 % . But
recovered strongly by domestic stimulus package in pay raise and public
construction and strong export growth (40 %)
in 2001, money supply growth back to 22 % . with GDP 8.2 % and Shanghai
index soared to 2200 new high in July 2001 while global stocks under correction
due to US interest rate hike resulted recession
The declining export, 50 billion domestic public construction deficit budget
and 150 billion short term debt and
falling corporate profit and falling prices as entering WTO in late 2001., as
stock prices plunged 40 % with US and global
stocks from 2200 to 1350 correction and
rebound to 1800 in 2002 due to soaring foreign capital inflow and direct
capital investment and retreat to 1450
in early 2003 reflecting to soaring oil prices due to Iraq war and fear of
global deflation. China
housing prices bubble Simulation
/Forecasts:
This equation predicted China housing
prices soared 10 times during 1986- 1994
as money supply growth soared form -5 % to 35 %, Beijin, Shanghai house prices
soared 10 times, ranking top 5 in global
prices, as Shanghai stock index soared
from 150 to 1500 . Housing prices
plunge 70 % as money supply growth plunge from 35 to 12 %, during 1994- 1998,
It rebound 30 % as money supply growth
from 12 % to 15 % in Asian crisis recovery in 1999 –2001 and government
economic stimulus package, Shanghai index
rebound from 520 to 2100
since 1999,.
However,
following US interest rate cuts to 5.5 % and excessive money supply ( over 20
%) and 52 billion annual foreign capital inflow, potential hot money by QFII in
the financial market boosting business
and consumer spending led housing prices up 20 % and auto industry
enjoyed 30 % growth since 2002 lead to banking property stock prices up 30-50 %
due to low interest rate and excessive
money supply( despite the rest of manufacturing still facing global deflation pressure ), lead to China People
Bank governor Zhou Xiao Chuan concern on
potential inflation by tightening the money supply to cool the housing bubble
lead to banking, properties stocks give up most of its gain predicted by the
author tracking of China macro,
financial trade economic impact on 700 listed corporate industries trends,
profit margins and stock prices
OSA/ASEAN
and OSA/Asian, OSA/Russia, OSA/South America Financial Crisis Root Causes
Simulation:
These formulas indicated the rest of Asian emerging countries, Russia, Mexico,
Brazil failed to do so, maintaining excessive money supply and growth, by
encourage short term hot money speculating in housing and stock markets
resulted soaring stocks and properties prices and labor costs caused export
decline and huge trade and current account deficit, led to runaway currency
depreciation and inflation, followed by rising interest rate and tight money
supply resulted economic contraction between 5 % and 10 % started July of 1997
, the burst of the asset bubble and widening of bond yield spread
These
formula provide global central banks and IMF combined feed forward and feedback
control of inflation GNP through micro-tuning policy, meeting growth and price
stability control without causing damage due to deflation and inflation, asset bubble bursts.
OSA/Japan:
Macro economics and financial markets applications:
These equation indicated Japan enjoyed 9.6 % GDP growth at 13.5 % money supply
growth and double digit export growth are excessive, inflationary in 1990 lead
to Nikkei soared to 38000. and Bank of
Japan cut money supply growth to 3.5 %
dragged to 12 years recession, deflation plunged to 13000 in 2001 , despite zero interest rate and soaring export and BOJ stimulus package to boost the domestic demand boost the money
supply from 4 % to 10 % and at zero interest rate Nikkei rebound from 15000 to 22500 lead Japan
getting out of deflation. 2001, -2003
US, EURO slowdown and rising oil prices , US high tech stock plunge drag
Nikkei to 7600 cut trade surplus from 11 billion to 6 billion.
Japan
Housing prices bubble Simulation
/Forecasts:
This equation predicted Japan housing
prices soared 10 times during the late 1980 as money
supply growth soared form 5 % to 13 %, Tokyo house prices soared 10 times, ranking top in global prices, as
Nikkei soared from 15000 to 38000 .
Tokyo house prices plunge 70 % as money supply growth plunge from 13 to 3 %,
during 1990- 1998, It rebound 30 % as money
supply growth from 2 % to 5 % in Asian crisis recovery in 1999 and
government economic stimulus package, Nikkei rebound from 13000 to 18000 in 1999,. However it down 10 % since Nikkei
plunge from 22000 to 7600 since 2000 US bubble burst resulted global
recession since 2001 and no sign of
near term rebound despite recent stock strong rebound fro 7600 to 9900.
OSA/EURO for Economy and Financial Markets Simulation:: These formulas tracking
the EURO 11 member countries monetary policy inter-bank interest rate converged
to 3 % and with 4.5 % money supply growth to meet 2 % inflation and 2.5 %
GNP in 1999 and Asian recovery, US soaring stocks, housing market wealth effect
pushed consumer, business demand for
EURO export weak EURO ,pushed oil price to 37, EURO money supply growth
exceeds 4.5 % to 6 %, inflation 2.6
% and
GDP of 3.5 % lead to EURO 7 interest rate hike in 2000 to tightening the money supply growth to 4.5
% and inflation to 2 % caused EURO slowdown widening trade deficit and EURO
plunged from 1.17 to 0.83,, earning decline and stock prices retreat 15 %. US
recession in 2001 and stock markets crash drag EURO economy and stock market down 50 % since
2001. US 13 rate cuts and tax cuts resulted soaring trade and currenct account
deficit and EURO rebound to 1.17 early this year. However cutting into EURO
export and corporate profit, EURO economy further drop to 1 % , lead to EURO
gave up 30 % gain to 1.12, recent stock market rebound with US are overheated
again for correction
OSA/US for Economy and Financial Markets Simulation
These equations predicted 1998 winter US
three interest rate cuts to 4.5 %, provide m2 money supply growth rate expanded
to 10.5 %, and dollar plunge 20 % to boost export Dow stock index soared form 7200 to 9600 and
provide 4 th quarter 1998 GNP 6 %. to
prevent US from danger of deflation caused by Global Financial Crisis related
credit crunch, it also predicted 1993 deflation: money supply dropped to -2 %
even the fund rate cut to 3 %, led to US GNP contracted to 3 %.., inflation
down to 1.1 % .This author warned on China Peoples bank governor Dai on Asian central bank monetary conference in
Macao, and Taiwan central banks governor Peng Pacific Basin Economy and Finance
conference May, 1999 an d on authors website www.osawh.com that US economy and stocks market
overheated will facing series rate hike
and bubble burst plunge 50- 90 %.
Greespan start 6 rate hike starting June 1999 reacting to inflation up to 3.5
%, GDP of 7.3 % in winter 1999 due to Y2K
excessive money supply growth ( at 11 %) lead to Dow soaring to 11500,
Nasdaq doubled to 5100, these wealth
effect further pushed consumer spending
to 8 % and tripled oil prices in
2000 , soaring property
prices last quarter 2000
GDP slowdown to 1.4 % inflation at 3.6 % despite Fed 6 interest rate hikes. US high tech
bubble bursts US recession in 2001 and stock markets crash drag EURO economy and stock market down 50 % since
2001. US 13 rate cuts and tax cuts resulted soaring trade (to 42 billion due to
Iraq war) and current account deficit and EURO rebound to 1.17 early this year.
However cutting into EURO export and corporate profit, EURO economy further
drop to 1 % , lead to EURO gave up 30 % gain to 1.12, recent stock market rebound
with US are overheated again for correction
US
Housing Prices Bubble Simulation
/Forecasts:
This equation predicted US 6 year
economic expansion since 1995, Dow Jones
tripled from 3600 to 11400 , Nasdaq soared 5 times lead to wealth effect
pushed nationwide housing price index up 70 % with some major high tech cities
like San Francisco, Silicon Valley, Boston, NY, prices even tripled.,
accumulated 7 trillion dollar wealth. Fed 13 rate cuts to 1 % and Bush 3 tax cut to stimulate
consumer demand for refinancing and import. Lead to record US trade deficit of
41 billion and drag US dollar plunge from 0.92 to 1.17 EURO and 116 Yen.,
housing prices up almost 20 % nearing bubble burst , recent Freddie Mac scandal
stock prices plunge and bond yield, and mortgage rate up almost 1 % resulted
mortgage loan drop already indicate the beginning of bubble bursts and European
selling Freddie Mac and Fannie Mae bond and continue in the years ahead indicating MBS (mortgage backed
securitization risks in banking NPL problem..
Monetary
Policy Impact on Global Financial Economics and
Financial Markets Dynamics Simulations:
Monetary
Policy and Shocks, Speculative attack impact on Global Financial Markets Prices
dynamics under stress:
Global
Interest Rates , Bond prices and spread, Debt Markets Dynamics , Credit, Market
Risk Simulations
Global central banks use the commodity prices and consumer inflation rate as the leading indicators for setting the monetary policy and short term interest rates (inter-bank rate or Fed fund rate), while the long term interest rate bond yield are related to the dollar exchange rate which influence the capital flow
Short
term Interbank or Fed fund rate =F (Money supply growth rate %, commodity
index, oil price, inflation )
While the long term bond yield = F(
money supply growth rate %, dollar exchange rate, inflation rate)
This author spending half time in China with Ji
applying this formula tracking, simulate China macro economic control in 1994-1996. China had inflati0on of 30 % in early 1994 .
Peoples Bank cut money supply growth from 33 % to 15 %, interest rate up from 8 % to 25 %, cut
import duty to reduce importing inflation, facing trade deficit and currency
depreciation pressure resulted inflation plunged from 30 % to 6 % in 1996 and
cut interest rate to 9 % achieved soft
landing and export growth, back to
expansionary money, fiscal policy in 10 th economic plan to stimulate the
consumer spending follow US 13 .rate cuts to 5.5
This formula also predicted global
interest rate, bond prices dynamics accurately. It indicate that reduced demand
due to Asian turmoil, tightening money supply , raise the interest rate have
drag down the global oils and , commodities prices and inflation. US excessive money supply ( over 10 %) in 2000
led to 3.6 % inflation rate and soaring
oil, commodities prices results Greenspan
cut money supply growth to 5 % and 6 interest rate hikes to 7 % in 2000 , bond yield follows short term Fed fund
rate. US plunging business, consumer
spending resulted recession in 2001 and
inflation dropped to 1.5 %, led to
Greenspan 13 rate cuts to 1. % and Bush 3 tax cuts to stimulate the spending in
2003 against deflationary threat.
US treasury and junk bond prices spread LTCM
failure simulation :
The
plunging oil prices during Asian Crisis allow
US, China , Japan and EURO central banks applying expansionary monetary
policy, which lead to falling interest rates and all time high in bond prices, US 30 yr - T-Bond yield dropped below 4.5 %
due to low inflation and strong dollar, while the Russia junk bond and US corporate bond was hurt by
global financial crisis, especially Russia high inflation, plunge oil income
lead to trade deficit and falling rubble , pushed yield to all time
high led to widening spread summer 1998
as predicted by this formula, while LTCM speculate on Russia junk bond believe
bond spread will converge below 2 %( it widening to 4 % instead) LTCM lead to
US Fed three interest rate cut to 4.5 %
to cut dollar strength, therefore the bond spread. Due to due to strong
dollar and low inflation, oil prices
However, excessive money supply in 1998 lead to
soaring US and global stocks, strong Asian recovery , with excessive money supply in winter 1999
for Y2K pushed global stocks even higher lead
oil price doubled from 10 to 37, US inflation up from 1.1 to 3.5 % forced
US 6 interest rate hike to 6.5 and
EURO 6 interest rate hike to 4.5
^ to cool off the soaring US stock market fueling consumer, business demand,
pushing housing prices and labor prices
bond yield soared from 4.5 % to 6.5%, due to falling dollar, rising
inflation, and concerned about asset bubble burst.
These deterministic models minimize risks , saving trillion dollar loses due to
central bankers monetary policy risks, credit risks in developing countries,
and betting on the wrong side of interest rates by LTCM and other banking and
financial industry executives`
OSA/ASEAN, ASIAN and Russia, Brazil crisis applications
While
the troubled ASEAN and Asian countries and Russia, Brazil, Mexico central
bankers have to tight the money supply, raising interest rates to fight
inflation and stabilize the currency which caused by excessive money supply and
currency depreciation, led to capital outflow, bond , stocks, plunge, bond yield
spread soared to new high, instead of converge, junk bond yield soared to 14 %
responding soaring oil prices, inflation.
OSA/Global
Currency Operations Simulation Analysis
Monetary Policy, Trade Impact on Global Currency Exchange Rates
Dynamics, Risks Simulation-
The Onset of global currency crisis:.
Based
on this authors 20 years daily 100
countries currency Operations Simulation Analysis indicated that global
currency are only responding to its market forces formula below. Global central banks, government, G-7
intervention have no significant effect on currency prices movement. Any country president, central banks
governors, market speculation can not
talk up or down its currency.
Dollar exchange rate = F (US trade
deficit, the other country's trade surplus (deficit), interest rate spread)
This equation explain how China raise interest rate in 1994 to fight
inflation , cut import demand, expand export and trade surplus to maintain
stable RMB at 8.27 during 1994-1998 and
fighting global deflation threat due to WTO. maintaining export growth and foreign currency reserve of
346 billion dollars , cut interest rate maintaining stable RMB exchange rate at 8.27 in 1999 to
current situation.
US dollar only responding to real interest rate, trade/current
account balance indicated US soaring trade and current account deficit lead to
its plunge against EURO and Japan (both
have 7 billion trade surplus against US 42 billion deficit and falling
interest rate early this year.
Exchange
rates are related to US and other
countries trade deficit (or surplus) and the two countries interest rates
spread
Over 100 IMF countries dollar currency
exchange rates simulations have been used for 1000 chemical engineering and
economics seniors course assignment by the
author Tracking results have been
published in the weekly trade journal for 300,000 Taiwan's Taipei
importer/exporters members daily trading decisions for 100 countries currency
and export/import competitive pricing
strategy
This formula accurately predicted
1998 summer US dollar overpriced at 147 Yen, due to soaring
Japan trade surplus against widening US trade deficit, US 3 interest rate cuts
led dollar plunge 20 % to 110. And continue its down trend to 103.
And EURO plunge from 1.17 to 0.83, as the union trade surplus plunged from 8 billion to
widening trade deficit of 800 million
due to soaring oil prices and import, despite ECB 7 interest rate hikes and intervention
in 2001
EURO
and global major currency OSA daily
simulation forecasts as follows
:
Asian, Russia, South American Currency Crisis, Risks Dynamics Simulation
The above formula tracking, simulating
ASEAN, Asian troubled countries, Russian, Brazil daily currency dynamics
before, at the onset of , during and after the crisis with average error below
1.5 %. It accurately predicted these central bankers must tighten money supply,
raised interest rate to stabilize the exchange rate (increase the interest rate
spread) due to rising trade and current account deficit.
Pre- currency crisis root causes Dynamic simulation :The excessive money supply and pouring foreign capital inflow led to ASEAN, Asian , Russia, Brazil economic boom and skyrocketing labor and properties, stock prices and wages, have cut into the export market competitiveness (against China's low labor costs), lead to soaring trade and current account deficit in Thailand, Indonesia, Malaysia, Philippines, Singapore, Korean, Hong Kong, Brazil, Russia. This formula indicated fixed currency were overpriced(as shown in the conference)
Dynamics
Simulation of onset and during the currency crisis
The widening of trade deficit to one billion US dollars lead to overprices currency : as the
announcement of floating the currency lead to instantaneous currency
deprecation according to this formula: Thailand, had to raise to interest rate
from 15 % to 30 %, to stabilize the Baht exchange rate around 50(depreciated
form 25), Hong Kong raised the interbank rate from 5 % to 25 % to allow the
Hong Kong dollar stick to the 7.7), S. Korea has to raised the interest from 20
% to 40 % to prevent it drop to 2000 (depreciated from 750) , Indonesia had to
raise interest rate from 20 % to 57 % to stabilize the Rupiah at 17000.,
Malaysia, Taiwan and Singapore, Australia all had to raise interest rates to
stabilize their currency due to widening trade deficit, . The central bankers
must raise the interest rate to stabilize their currency and fight inflation.
Thailand, Korea, Hong Kong, Brazil, doubled interest rate Russia tripled the
interest rate to fight inflation and stabilize currency , cut domestic
consumption, thus improve trade and current account surplus.
OSA/Brazil
central bank decision to float the Real currency, cut the interest rate to save
the stock market, took the Real dropped from 1.1 to 3.4, help to boost the
export, the stock responded to the interest rate cut, rebounded from 5000 to
9700, the global players are supporting the stock markets make it stick to Dow
index (following Hong Kong style), despite Brazil economy under 4 % contraction
and further tightening to cut expenses, Brazil interest rate, Real currency and
impact on stock market have been simulated accurately
Monetary
Policy Impact on global economy, industrial sectors demand, corporate earning, Asset Prices Simulation
and e- investing Strategy
(Two master hands controlling global
asset prices, bubble stock prices)
Monetary Policy on China / Taiwan/US
natural resources, commodity, 20 old and new economy industrial sectors
5000 products demand, prices, corporate earning and Asset prices simulation
This
author accurately warned on China peoples banks governors sponsored
central banks governors conferences May 15, 1999 in Macao, that the US 3 rate
cuts resulted excessive US and Asian demand pushed oil prices doubled will lead
to US Fed a series interest rate hike (Fed raised rate in June) to cool off the
economy and soaring stocks, housing
markets prices resulted wealth effect. pushed inflation over 3.6 %, He warned on www.sina.com and www.osawh.com in Jan
2000 that China and US high IPO and ADR shares are overheated, due to excessive
Y2K money supply and financial markets
analysts overoptimistic over second half earning , ignoring more rate hike to
cool off the overheated manufacturing (NAPM soared to 58) Nasdaq IPO, bubble
will burst plunge 50-90 % . The Market did start correction in Apr 2000 half
soaring oil prices .
He warned again in Aug. 2000 on the
website, that US economy will facing
recession risk with NAPM plunge to 41, consumer confidence plunge below 90 in
the first quarter 2001, with earning decline drag IT and biotech high flier
stocks above 100 for 50- 90 % correction
compressed to 20-50 and Nasdaq test 1200- 1400, Dow will test 7500
with finance, retail stocks subject to 30 %-50 % correction and entering 6 month bear market , Fed will cut
rates, but will take 12 months for any economic and stock market
recovering.
Monetary
policy, oil prices impact on old
economy industrial demand,
supply, prices,:
Dow
blue chips old economy stocks are overpriced, ignoring 6 rates hikes and
soaring oil prices pushed raw material and energy costs for most petrochemical,
fibers, plastics, mining, transportation while plunging products prices due to
sluggish demand ( NAPM plunged from 58
to recession low of 41.3) and shrinking profits and widening loss, plunging
stock prices.
While retail sales facing sluggish sales, and deep discount , shrinking profit
margin, stocks prices overpriced, subject to 30 % correction in the first
quarter 2001.-2003
Banking,
finance industries facing business loan defaults due to tight credit (poor
credit quality) and soaring
nonperformance loan,
Slump
in trading income and underwriting income
shrinking profit margin due to stock market plunge, despite 100 base point
rate cut, stocks price plunged 50 -90 % 2000-2003
Monetary Policy Impact on Global Commodities, Financial Futures Derivatives
prices trading loses Risks OSA:
The Global Commodities, Industrial raw materials, consumers products and
Futures Prices and Risks Simulations, Forecasts
Metal,
commodities cash, future prices = (current, future oil price, inflation rate,
dollar exchange rate)
The risks in uncertainties in corporate profits due to global deflation,
resulted product demand and prices slump in global commodities, industrial raw
material and consumers products contract and spot and futures prices and credit
crunch can be simulated to it's current and future raw material cost,
downstream demand, and the dollar exchange rates in the trading countries or
spot, futures markets. Thousands of such proprietary prices simulation
forecasts models have been developed, implemented for 20 millions US, EUROS,
Taiwan and China's corporate procurement, marketing, sales managers and 300,000
importer/exporter members weekly global currency tracking and import/export
pricing strategy and gold and metals, feedgrains, oils, petrochemical, fibers,
plastics, paper and computers companies daily global corporate procurement,
marketing strategic decisions during the last 14 years and Asian crisis drag down oil, commodities prices and
inflation rate .
OSA/Oil , Natural Resources, Raw
materials, export/import product
prices refinery profit margin
Gas, Heating oil, gasoline prices = F
(consumer demand, crude oil prices, inflation, refinery operating capacity)
raw material, IC chips and product prices = F( Business demand, raw material
costs, exchange rate, life cycle )
Crude oil price = F ( gasoline price,
heating oil prices, exchange rate, consumer demand)
Export /Import Product Prices = F ( consumer demand, raw material costs,
currency )
US tight refinery and gas capacity (
operated at 97 %) and dollar plunge from
125 to 115,excessive consumer demand ( built up inventory) are responsible for
heating, oil, gasoline prices to 100
pushed crude oil prices to 39 and
gas to 10.5 in pre Iraq war, Refinery margin dropped from 8 % to 4 % as
shown in the simulation, is benefited by high gasoline demand and prices
support in US, EURO, Asian oil consuming countries are hurt by fuel oil and
crude oil prices
OSA/Global Asset Prices Simulation
:Monetary Policy Impact on Global
Capital Markets Asset Prices,
Investment Strategy
Monetary policy impact on global stock market indices cash and futures trading
loses risks simulation:
Stock
Index/Bond cash and future price = F ( money supply growth, consumer, business
spending, interest rate, dollar exchange rate)
US economic, stock market impact on Asian stock index
The following structural co-integration of US stocks into Asian stocks due to
its export market dependence.
China
stocks index = F ( China money supply, consumer spending growth, inflation, US
Dow Jones index)
Taiwan
stock index = F ( Taiwan money supply, consumer spending growth, NT exchange
rate, interest rate, Nasdaq index)
due to US account for 40 % of China export, while Taiwan electronic stocks
amounts to 50- 90 % of market value
And
mostly export to US
This relationship simulated last 20
years 40 daily international stock market stock indices, including normal and
major crisis (under stress discontinuous data) with average error below 1.5 %
Applied by this author in China tracking China shares accurately during 1994-98
for 15 cities daily TV, radio 30 million investors, predicted inflation, money supply growth, RMB
impact on Shanghai A, B listed stocks
1994-2000 and Dow jones impact since 2001 China joining WTO and tracking Taiwan
markets since 1984 till now, shown Taiwan stock index following Nasdaq plunge
70 % since 2000.
It also predicted 1987 crash as FED raise fund
rate 0.75 %: Nasdaq plunge form 5100 to 1100 during 2000 to 2003 as Fed 6 interest rate
hikes lead to 2001 recession, business
spending plunged fro 18 % to –5 %, consumer spending from 10 % -2 %and 1995 Baring betting on the wrong
side of Nikkei Index. And 1990 Nikkei crash from 38000 as Bank of Japan
tightening the money supply growth from 13 % to 5 %
OSA/US Dow Jones Index risk dynamics simulation:,
1987 crash :The high US inflation rate (6.5% ) complicated by the Iranian war
in early Oct. 17, 1987, pushed the oil price to 25, lead US Fed credit
tightening, reduce the money supply growth from 9 % to 7 %,, raised the Fed
fund rate from 9 % to 9.75%, the Dollar Yen exchange rate drop from 150 to 136,
took the Dow instantaneously crashed from 2250 to 1520 It also indicate the Dow
responding to last winter 3 Fed fund rate cut , each 25 base point
corresponding to raise the money supply 1 % and pushed Dow 800 points ( the
first rate cut pushed money supply from 6.9 % at the credit crunch, Dow rebounded
from 7400 bottom to 8200, the second rate cut pushed money supply from 8.5 % to
9.5 %, pushed Dow from 8200 to 9000, while the third rate cut led to overheated
stock and properties prices and speculation, the money supply growth pushed to
10.5 % in January, took the Dow marching toward 10,000 and making new
highs 11500 in mid March, due to high
money supply growth of 10 .5% and three Fed fund rate cuts to 4.5 %,dollar
plunge 20 % to boost export (IC and computer industry are benefited) and 2000 to
2003 as Fed 6 interest rate hikes lead
to 2001 recession, business spending plunged fro 18 % to –5 %, consumer
spending from 10 % -2 %, 7 rate hikes
drag EURO stocks 55 % as indicated
This
right master hand pinpoint the risks of overheated investor sentiments
(monetary policy tell you do not chase index
when they are too hot, when every
fundamental and technical analysts recommending bull market continue,,
investors chasing ( This author warned on July 20 1998 Dow approaching 9500, is
overheated for 20 % correction, Next day Greenspan warning on inflation and
rate hike, drag Dow to 7500 and on Jan
2000 the author warned on www.sina.com
and www.osawh.com that
Dow overheated at 11300, will be plunged to 8000, Nasdaq overheated for correction
to 1500
with IT bubble burst, plunge 50- 90 %
Global corporate earning, profit margin simulation (Left master hands)
Corporate Sales = ( customer demand, unit price ) = F ( consumer demand, unit
prices)
Corporate margin/earning = F( Sales, Costs) = F (raw material, financial, labor
costs, consumer demand, sale prices)
=
F ( consumer demand, currency)
Global Stock Prices Simulation :The left
master hand simulate last 20 years
monetary policy impact on daily
raw material, financial, labor costs, sales and unit prices, corporate earning,
profit margin
global stock prices = F (Global stock index, corporate profit margin/earning)
The left master hand will tell you how monetary policy impact on the industrial
sectors supply demand, prices corporate earning, profit margin stock
prices decline is over, when everybody
is selling ready for turnaround
Therefore combing right master hands( investors sentiment) and the left
master(corporate performance) will accurately predicted last 20 years global
stock prices (hot stocks, ADR, IPO)
SOE Reform, privatization, and Hi-tech venture capital performance and IPO stock prices simulation
China SOE will be facing reform through privatization and corporate governance
IPO prices are linked to market investors sentiment and corporate earning
China IPO linked to Shanghai A index and IPO earning while US
IPO prices = F( Nasdaq index, corporate
or industry group earning, profit margin)
These two master hand controlling old
and new economy IPO prices as well
For China high tech stock IPO are related to US Fed money supply growth,
interest rate and China investor sentiment ( US Nasdaq , China Shanghai A
index, profit margin),
For US Internet stock index are related to US Fed money supply growth, interest
rate and investor sentiment (Nasdaq index), as for individual internet IPO
stock prices, they are related to the internet stock and Nasdaq index (investor
sentiment in internet) and corporate revenue and earning outlook(depend on
industry trend and regional economy. As Yahoo soared to 350 when Nasdaq soared
to 5100, and follow Nasdaq plunged to 1100,
Yahoo plunged to 11
Global
ADR shares prices are linked to home country
and listed (US)country investor
sentiment and share company earning)
Global ADR shares prices = F( Home country investor sentiment, listed country
investor sentiment, stock earning, margin)
= F ( home country stock index, US
Nasdaq index, corporate earning) The right master hand pinpoint the
risks of overheated investor sentiments in the listed( US )and home
country(monetary policy tell you do not chase hot ADR stocks when they are too hot, when every analyst recommending,
investors chasing ( the author warned
Nov. 1999. on sina.com that China ADR
are too hot, speculating on merger acquisition, ( China telecom ADR in
US will following US nasdaq plunge 50-90
%. soared to 150 as Nasdaq soared
to 5100, Shanghai soared to 2000 it plunged to
13 as Nasdaq plunged to 1100 , Shanghai A plunged to 1200, telecom
industry facing rate cuts, falling prices. All these relationships indicating
internet, IT and biotech IPO stocks are
extremely volatile and overpriced,
Global Asset bubble simulation, early
warning and risk management
Simulation of US, China , Taiwan, global central bank monetary, economic,
fiscal policy impact on global asset prices, bubbles, and early warning, risk
management
.OSA- Asset Bubble Burst- Stock and
properties, industrial assets (old and new economy assets ) markets asset
bubble burst in Global Stock prices impact on house, business spending, housing
properties prices, GDP and central banks Monetary Policy
A. OSA-Country Risks: Country inflation/Deflation economic and business cycle,
capital flow, currency, systemic credit, nonperformance loan, banking crisis
and default risks simulation and control
B. OSA-Credit Risk: Macro-economic imbalance, currency, commodity, interest
rate, stocks bond,
derivatives market , trading, policy, operation , liquidity and corporate
credit default risks simulation,
control,
C. OSA-Commodity: Policy, currency, oil prices, supply/demand impact on Energy,
Feed grain, food,
metals, fibers futures and derivative prices resulted trading loss simulation.
D. OSA-Currency: Interest rate spread, trade impact on daily global currency ,
and it's derivatives prices dynamicsthe onset of currency crisis risks
simulation and control
E. OSA-Interest Rate: Policy, currency, inflation, commodity price shocks
impact on short , long term interest
rate, treasury and corporate bond spread and it's derivatives prices risks
simulation , control
F. OSA- Market Risk; Policy, external shocks impact on global money, currency,
stocks, derivatives markets
price ill-liquidity risks simulation,
control
G. OSA-Reform /Merger Risk: Policy, external shocks, technology innovation
impact on pre/post merger/acquisition
cost/benefit, profit margin, stock prices performance risks simulation,
control.:
Global enterprises expanded their market share by merger and job cuts all fail to improve their profit
margin in post merger integration resulted stock prices up 50 % on merger news
speculation and give up all their gain to new low in post merger
integration. Big is not beautiful for
banking and all other merger, it is
risky: presented by the author on JP
Morgan sponsored post EURO banking and finance integration and risk management
strategy Nov. 26, 1998, Rome Italy
He warned banking finance industry mega merger emphasized on staff reduction benefit
and diversification , ignored post merger integration improvement on risk management
decision making resulted Citigroup, UBS billion dollar loss in Russian, and
LTCM crisis.
He accurately predicted Chase Manhatten 36 billion dollar merge JP Morgan Chase plunge ( the merger is too expensive and risky for
UBS which just recovered billion dollars lose in 1998 Russian and LTCM crisis ,
will face markets slump risk in H.OSA-Procurement:
Monetary policy, macroeconomic, currency, oil price shock impact on global oil,
petrochemicals, plastics, fibers, commodities, semiconductor raw material
prices strategic procurement management
I.OSA-Real Estate bad loan Risk:
Monetary policy, commodities prices shock, stock markets wealth effect,
inflation, capital flow impact on residential, office properties prices and
rent, nonperformance loan risk simulation, control ,
K. OSA Economic ,Business Cycle Risk::
Monetary policy, external shock impact on inflation, GNP, unemployment, wages,
consumer confidence, auto, housing, appliance, electronic demand, export,
purchasing managers index etc.
Global Corporate Governance Scandals Early Warning OSA
US Sabarne-Oxley act to maximize corporate governance by set up independence board member and supervision requirement and audit
committee financial expert perform auditing and supported by independent equities
research will not
Able to tracking the complicated daily fast changing structural financial derivatives and asset prices. ( which currently are based
on speculation on the business, financial news)
Only the decision tools tracking global capital market asset
prices simulation displayed here can applied to global corporate
daily cost and financial accounting on and off balance sheet
performance supporting compensation, internal
and external auditing committee.
As our simulators tracking simulate, forecast 3 month ahead the oil, gas
prices and high tech bubble burst impact
on Enron and WorldCom stocks China
Guanxia bubble burst and scandals. Simulation results will be demonstrated in
the conference and Training board
members, management team and investors maximize corporate governance
performance and transparency
Conclusions and Recommendation:
The expert simulations systems
presented here have been and will
provide daily reliable decision
tools for China and global economic ,
banking, finance, SOE , medium enterprises reform; central banks, government economic, fiscal policy planners,
securities, banking, insurance
supervision, regulations, WTO trade, procurement official and banking, finance, enterprises CEO, executives
rational, independent, policy impact simulation forecasts to achieve growth and
prices stability, investment and supply chain strategy to avoid wealth, assets
bubble bursts, excessive investment and inventory built up in financial crisis. It will also support daily banking, finance, insurance reform,
supervision, regulation, nonperformance loan and corporate accounting scandals
early warning decisions analysis to
avoid trillion dollar financial market loss financial markets for on line banking, investing, e-learning to
predict and prevent future financial
market prices instability in internet age due to excessive monetary
policy and financial and real estate properties markets decisions based on the
current risks models betting on the wrong side, and joining
the crowd. resulted trillions dollar loses
Acknowledgement
The
author is grateful to feedbacks and valuable suggestions from millions China and global government economic, finance, trade
executives, and banking, finance,
corporate CEO, CFO, fund manager, supply
chain, marketing export managers, trader, investors, attended the authors’
thousands workshops and visited www.osawh.com website contributed to the development,
feedback , implementation of two master hands controlling global economy and
financial market prices, and especially
to X. M. Ji help in China banking
finance application lectures to 14
cities 20 million TV, radio investors and hundreds nationwide banking,
securities companies CEO, CFO, executives workshops during 1994-
98
The author is grateful to Taiwan hundreds state owned, medium enterprise CEO,
CFO, senior executives financial support
for implementing OSA in enterprises strategic investment, supply
chain program maximize board members, management, investors performance and
banking, finance, TV, daily newspapers, economic, finance, investment , trade journal
supporting authors lectures and articles to 6 millions investors, executives,
readers enterprises in authors thousands lectures and articles since 1980 and also to 300,000 Taiwan import/exporter members for
feedback and support for authors weekly 100 countries currency, import/export
pricing strategy.
References:
Global
Macro Economics, Monetary Economics ,
Financial Markets Simulation Reference
IMF
report on Global Economic Outlook and Capital Markets Implications Dec. 15,
1998-2002
EURO convergence report, Dec 18, 1998 by European Central Bank
Federal Reserve Board Systems working papers, speeches:
Michael Gordy: A Comparative Anatomy of Credit Risk Models: Dec. 1998
Greenspan: Speech on Financial Derivative, Mar, 19,1999 and Asset Bubble Aug.
27, 1999 and monetary policy , state of
the economy review to congress 2000-2003
John Rogers: Aggregate Disturbance, Monetary and the Macro economy The
FRB/Global Model, 1998
John Williams: Aggregate Disturbance, Monetary and the Macro economy The FRB/
US Model, 1998
Marvin Goodfriend: The Neoclassical Synthesis and the Role of Monetary Policy,
June 1997
Warren
Huang References : Banking and Finance :
1a” Asian capital markets asset prices simulation strategic supply chain logistics” to be presented to Global Supply Chain Logistics Conference, by Northern Jiaotung University, School of Management, May 29-30, 2004 , Beijing
1b Global/Asian capital markets asset prices, bubble , financial crisis, simulation, corporate governance early warning, risk management ” presented to Pan Pacific Business Conference, sponsored School of Management, Shanghai Jiaotung University, May 29-30, 2003
1” Asian capital markets asset prices, bubble simulation, risk management” presented to Asian Business Forum sponsored ABS securitization conference, Kuala Lumpur Sept 30-Oct. 1 2002, for global central banks, banking, securities, stock exchange investment banking asset allocation,
2” Asian Financial, banking crisis, Asset securitization early warning, risk management and hedging” presented to Asian Business Forum sponsored ABS securitization conference, Kuala Lumpur Sept 30-Oct1 2002 for global central banks, banking, insurance, securities commissions risk supervision..
3” Strategic European and Asian hedging fund risk management” presented to Intl Business Conference ,London on, July 11-13, 2002
4 ” Global/China capital markets asset prices, bubble, corporate governance simulation, risk management” presented to Global corporate governance conference, Peking Guanhua School of Management, Peking University, Beijing, May 28-
and speaking to Guanhwa school of Management EMBA/CFA , financial engineering faculty, graduate students, May 29.
2002 www.osawh.com/GCaptbj.html
5 Strategic China oils upstream/downstream ERP/SCM/CRM maximize WTO profits and ” Cross strait China strategic investment, merger/acquisition return and risks in post WTO ” 2- full day workshop offered to Chinese Petroleum investment, planning managers at Taipei Howard Plaza Hotel, Jan 21-22, 2002 www.osawh.com/Chinaerp.html
6 ” Strategic China oils upstream/downstream ERP/SCM/CRM maximize WTO profits” full day workshop offered to IBC (Int抣 Business Conference) Asia to Exxon, CNOOC, China, Asian oil, gas, Singapore Development bank VP, executives at Beijing Kerry Center Hotel, Nov. 29-30, 2001
7 ” Cross strait China strategic investment return and risks in post WTO ” lectured to IBC (Intl Business Conference) Asia to Exxon, CNOOC, China, Asian oil, gas, Singapore Development bank VP, executives at Beijin Kerry Center Hotel, Nov. 29-30, 2001
8.” Strategic integrated supply demand chain for oil/chemical industry ”, offered keynote speech to IBC (Int抣 Business Conference) Asia to Exxon, BP, Shell, Thailand Petroleum, petrochemicals, Chevron, Texaco, VP, trade managers, IT software VP, Apr 26-27, 2001, Singapore trader House
9.” Strategic integrated supply demand chain TQM saves billion dollar SCM cost for oil/chemical industry ”, offered full day workshop to IBC (Int抣 Business Conference) Asia to Exxon, BP, Shell, Thailand Petroleum, petrochemicals, Chevron, Texaco, VP, trade managers, Apr 26-27, 2001, www.osawh..com/ibcworks.html
9b Hydrocarbon Processing Advanced Control, information systems handbook 1991-2003 www.osawh.com/hp2001h.html
10”. Monetary policy impact on Financial , Banking crisis, risk management “ presented to Academic of Finance , US FED Chicago governors, Mar. 7, 2001 Chicago,
11 50 anniversary meeting of Midwest Finance meeting , US Fed Cleveland governor, Mar. 30,2001 Cleveland, Ohio
12 Monetary policy impact on Financial market prices ,e-global currency, e-Investing Strategy and e-Risk management”, presented to Global Finance conference Apr 4-7, 2001, Los Angeles
13.. " Monetary Policy impact on Asian financial crisis, recovery and risk management" presented to 9 th Asian Pacific finance conference, Bangkok, Thailand, July24, 2001 presented to Asian central bank governors, banking, finance CEO, CFO, academics.
14. " Monetary, Economic., Fiscal Policy, WTO impact on China and US bubble burst recovery, stock prices and risk management" spoke to China Peoples Bank Beijin Banking, finance executives, July 2001 predicted China stocks bubble burst, Shanghai A plunged from 2200 to 1500 and US recession resulted global stock crash ( details on www.osawh.com visited by millions global government, banking, finance, corporate executives
15. " Monetary Policy impact global financial crisis, recovery" speak to Thai prime minister, ASEAN, Taiwan central banks governors 7 th Pacific economic and finance conference , Bangkok, Thailand, June 1, 2000, banking, finance CEO, CFO, academics
16. Monetary Policy Impact on Global Financial Banking Crisis and Risk management’, Invited by NASD, American Futures Association, George Mason , George Washington Univ sponsored Washington Area Finance research Conference, Apr. 30, 1999
18 Asian/Global Financial , Banking Crisis Recovery, pre-warning and Risk management China Peoples Bank, Monetary Authority of Macau sponsored Int'l Central Bank Governors Conference on Policy for Sustainable Growth in Macau, on May 15 ,1999 to global central bank governors.
19 Global, Financial Crisis impact on Pacific stock and financial derivatives markets and risk hedging” to Pacific Basin Finance and Economic Conference in Taipei( speak to Taiwan Futures Association, Minister of Finance, Taiwan Central bank governors, NTU May 28-29, 1999,
20 European Finance conference on June 3, 1999 speak on Global financial crisis impact on EURO capital markets and session chairman for risks in int'l context , invited by Prof. David Walker, Global Capital Markets Research Center Director of Georgetown Univ. to a panel on emerging markets economy and crisis on June in European finance conference in Barcelona, Spain June,1999 .
21 “ Global financial crisis impact on global government and business risk management strategy” presented to .USDA, dept. agricultural government economics research service conference on Business & Government Strategy, Capital Hilton in Washington DC June 30,1999, speak to the joint global financial crisis session and panel discussion on Global financial crisis impact on Government and business global risk management strategy. Dr. Huang together with World Bank, IMF director, Oxford Economics president, S&P DRI, director , US Agricultural economist, Goldman and Sachs.
22 Financial Crisis Impact on US financial markets prices, risk management,”, Midwest Finance conference Mar. 28 1999, chairman on investment
23. Global Financial Crisis Impact on Global Currency Multinational Performance Risk Management "Multinational Finance Toronto, July 7, 1999
24. Global Financial Crisis Impact on Global financial markets prices, risk management “ Royal Statistical Society, UK, Warwick, UK, July, 14, 1999
25. " Monetary Policy impact global financial crisis, recovery" and " How China avoided Asian Crisis, achieving growth and stability" speak to ICCG Global financial crisis conference, Bangkok, Thailand, Oct. 22, 1999, speak to Thai prime minister, central bank governors
26. Goal, Mission performance oriented OSA teams education and training” to American Inst. Chemical Eng. Dallas, TX, Nov 20, 1999
27.” Monetary Policy impact global financial crisis, recovery, risk management ” to Japan APEC Studies conference Tokyo , Japan, Dec. 15, 1999
28 Asian Financial and LTC Crisis Impact on Post EURO financial and banking integration performance, strategy” speak to J P Morgan, European Central Bank and University of Rome on Post EURO finance and banking integration strategy conference in Rome Italy, Nov. 24-25, 1998
28”:Simulation of Asian Financial and LTC Crisis Impact on Global Financial Markets prices performance” Speak to EC2 econometrics Forecast conference in Stockholm Dec19,1998 Swedish school of economics,
29 Asian Financial crisis impact on financial derivatives prices simulation and hedging risk management”, speak to QFM 98, Computational Methods in Financial Derivatives conference, in Sydney, Australia, Dec. 16 , 1998
30" Global Banking, Finance, Enterprises Reform, Strategic Change Management” to World Economic Forum, Fudan University, July , 1997, Shanghai
31” Integrated global refinery, petrochemical strategic management and enterprises reform, change management ” to INTERPEC CHINA 91, by SINOPEC president, Oct. 1, 1991, Beijing and Large Chemical plant conference Antwerp, Belgium, Sept, 1991, 1995 and ASEAN Petroleum Minister meeting, Singapore, 1989
32 “ Economic Impact on global petrochemicals demand, trades, prices” presented to World Cong. Of Chemical Engineering, Tokyo, Oct. 1, 1986
33” OSA applications in Chemical Eng. Education and Training”, to Third Chemical Eng. Congress, Tokyo, Sept. 1986
34 OSA for global petrochemical marketing, sales strategy” to American Inst. Of Chemical Eng Diamond Jubilee Meeting, Washington DC, Oct. 1983
35”. Improve Process by OSA ,” published on Hydrocarbon Processing, May , 1980( one million copies in 78 countries)
36. sample
articles in Chinese on Taiwan economic
daily news and China Shanghai Securities, Shenzhen, securities news and lectures, Workshops program for Singapore
supply chain, Beijing post WTO China profit management and Kuala Lumpur, Asian
Business Forum, Asset Backed Securitization conference will be sent
in the separate em