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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: Surfer who wrote (7396)	8/3/1999 1:34:00 AM
From: marc ultra	Read Replies (3) of 15132

Surfer, I do not believe the US market drop was directly causal in the Fed's decision to cut rates last year but the factors that contributed to the market drop such as Russia, and other Emerging market problems was the direct cause of both with the Fed worried about the possibility of a global meltdown and potential world wide including a US recession or worse that led them to cut rates the first two times and then with the markets still shaky the Long Term Credit hedge fund debacle caused the third pre-emptive cut. The situation is much different now with much of the world in recovery and inflationary pressures bubbling up in the US. Considering that the Fed's models show US stocks to be something like 30 or 40% overvalued I think if we had a 30% drop in the market the Fed would be in no great rush to cut rates unless it looked like the risk of recession was far greater than incipient risks of inflation, something that can only be determined at the time. Obviously as we approach a 40% or 50% bear we are talking about a major event that will affect the economy and would likely lead to rate cuts. Marc

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