Part 9 -Ten-thousand fold profit in six years- the legend of Taiwan stock market

A short article worth thousands billion US dollars-“ G5 reached an agreement about managing the fluctuating value of the US dollar."

Due to the conflicted between the United States and the Soviet Union in 1950th , the treaty of NATO(North Atlantic Treaty Organization) and “Warsaw Pact" were created and form two groups of power between countries. In the late 1980th, this had greatly impacted the national power of the United States.

The rising of interest rate and inflation had led to appreciation of the US dollar.

From four of the main factors of economic boom that the United States was against them: consumers hold off spending (people had constantly been threatened by the war) and investment slowdown (government departments reduced their cost except the department related with arms and wars). Budget deficit caused by the increasing of government military spending. And in addition to that, the cowboy president Ronald Reagan, the most American chauvinism after World War II, on the one hand growing the government spending; on the other hand reducing the federal income tax and capital gains tax. After “Reaganomics", the financial deficit had got worse with the high inflation rate settled at 15%. Under this situation, the Unite States had no choice but used its political supremacy to solve their tough problems. Not only did it forced the Soviet Union to agree the strategic arms reduction treaty, but convened a very important meeting – “Plaza Accord". G5 (the United Kingdom, France, West Germany, Japan and the United States) had signed the accord on 1985 at the Plaza Hotel in New York City. This big global event, however, occupied a small place in Taiwan’s newspaper. Apparently, with the dollar’s depreciation, relative prices of the United States exports fall, leading to increased export demand. In effect, the United States wanted to beat Japan to grab the largest semiconductor market. Also in 1986, “semiconductor trade agreement" between U.S and Japan had opened the door for the joint of Window and Intel in the following 1990th.

Though this process, no one could know the Taiwan stock market will soon boomed to 12,682 point from the “Technical Analysis". On the contrary, if one pay less attention to technical analysis, and focus more on the reaction between Taiwan and its instructor -the United States, will he understand the reasons of lifting martial law and decontrol of foreign exchange in the following 1986 and 1987. And then, choosing and buying the profitable stock will be a piece of cake to the investors. Although you did not recognized to buy Cathay Life Insurance, you would know to buy (1419 Shinko.Textile), (1903 Shihlin Paper ) or construction stocks. You might not be like Wan-tsai Tsai, know to sell the stock of Cathay Life Insurance in the price of 2,000 NT dollars. Unless, you would not be vanity and a striving after wind as I was after this process of luxury. I had lost the greatest opportunity on Taiwan stock market in its biggest bull market period. Thankfully, I have learned to pay close attention on the economic development, statements and movements between the powerful nations. A lesson I have learned: be aware of international trend.

To be continued…