How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 478.52

-2.8%

Dec 10 3:59 PM EST

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To: ed who wrote (38177)	2/20/2000 5:15:00 PM
From: Dinesh	Read Replies (3) of 74651

Ed, [snip]By hikig the rate , the money goes to the government[snip] Now, what on earth gives you such ideas... The Fed raised the Federal Discount Rate, which in turn affects the Federal Funds Rate used by the banks on overnight interbank borrowing for reserves that must be maintained in order to assure solvency; and, these reserves are maintained in Fed Reserve dollars. Banks are allowed to borrow these funds amongst themselves in order to meet their reserves requirements. As the Discount rate is lower than the Fed Funds rate, why shouldn't bank borrow from the Fed (i.e. the Govt) ? Because the Fed is a lender of the last resort and asks some very tough questions. Basically, the Fed is not so naive. A rise in the discount rate leads to higher target rates for federal funds which leads to a lessening in the banks' debt portfolio. Thus the Fed contains the risk of a runaway consumer demand for $$$. This is largely a trial and error kind of control. There are other methods too to inject or extract liquidity from the markets. perhaps you need to bone up on the basic tenets of Supply and Demand side economics and on our Banking System. Cooling the economy BTW will also mean less receipts for the govt... Insofar as leaving the stuff to the markets, perhaps next time you put your $$ into bank, you should look for a bank that's not FDIC insured; and repeat the 'let the market handle itself' mantra. *** Re MSFT stock price which I think is what brings us all together here. I think that the price already reflects antitrust risks, and the risk of missing out on some of the aggressive tech opportunities. I also think some long term bulls are cashing out, while there is little demand unless the DOJ case settles. It's bad timing for the price, and good opportunity for those with longer horizons and less appetite for risk. Regards Dinesh

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