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To: Crystal ball who wrote (29089)	8/11/1999 12:22:00 PM
From: Bridge Player	Read Replies (4) of 41369

<< and if Greenspan inflating the Fed rate 5-5.5% to another 25 to 50 points doesn't just push the US 30 year treasury over 7%, and cause STOCKS DOWN >> Crystal, you don't understand the psychology of the bond market. The best thing that Greenspan could do is raise fed funds a full .5% rather than the .25 that everyone is talking about, retain a neutral bias, and accompany the move with some reassuring words about this being a preemptive strike etc. The market would stop worrying about a 3rd rise later this year, the 30-year bond would go back to about 6.0% yield within days from around 6.25 currently, and the stock market would have a very nice rally. The bond market has already priced in at least 1/4 and probably a full 1/2 already. In effect, it has already done much of Greenspan's work for him by letting a little air out of the bubble. The worst thing the Fed could do is leave rates unchanged at the August meeting, thus causing worry in the financial markets that they were not sincere about forestalling inflation. BP

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