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Non-Tech : JP Morgan/Bank of America/ High Flyers
JPM 311.12+0.5%Oct 31 9:30 AM EDT
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To: Mr.Manners who wrote (28)5/7/1997 7:08:00 PM
From: Barron Von Hymen   of 81
 
I believe that the run up in the DJIA and bonds last week was due to the expectation of the results of the balancing of the budget talk was positive. However, upon closer analysis, reading the budget talks, there seemed to be a lot of "agreeing upon certain things" but no motion for action. As useful as politician's election speeches, I think. Wasn't enough to keep the markets going today at least. I also think that the rally up was false, and will retrace itself, after which, the true direction of the market will show itself. And that will be down.

Following a poor auction of money instruments today, and the poor performance of bonds this morning, suggests that the banks are losing their strength. With BAC, and WFC failing even to test the new target highs, suggests that the downtrend may begin earlier than expected. But WFC seems to have fallen a bit too sharper than I expected which means that it will be the top decliner in the banks. BAC responded as expected and should continue lower, with probably as much momentum as the others but less than WFC.

The most important feature I felt about the Beige book report today is that though the economy is expanding moderately as expected, there continues to be a tight labor market which may lead to inflation poking its head up through the limits. Another flag that indicates the banks will do poorly in the long term.
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