MDA - Market Direction Analysis Message Board

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Strategies & Market Trends : MDA - Market Direction Analysis

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Nov 28 4:00 PM EST

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To: Follies who wrote (25045)	9/7/1999 6:27:00 PM
From: pater tenebrarum	Read Replies (2) of 99985

LOL! let me add something to your metaphor: when the Fed raises short term rates, the bond market at first tends to sell off, but profits in the long run, as inflationary pressures are countered by rising rates and the economy slows down. however, more important than saving the bond market may ultimately be the saving of the dollar. it stands to reason that the combination of a soaring current account deficit and a recovery in overseas economies will strain the dollar further in the not-too-distant future. this could potentially lead to wholesale dumping of U.S. paper assets by foreign holders. it may well be that significantly higher interest rates will be required to keep the dollar from falling off a cliff. if the Fed has to choose between keeping the stock market afloat vs. keeping the dollar afloat, the dollar will win out.

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