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Strategies & Market Trends : Join stock club--Tang Fund
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To: Arthur Tang who wrote ()2/26/2000 6:31:00 AM
From: Arthur Tang  Read Replies (1) of 145
 
Wall street sentiments were that the economy is so good that Dow will go down another 1000 points to 9000 before turning around.

The pressure is from the FEDs, threatening to raise interest rates on the short term instruments and the overnight discount rates.

The problem is multiple. Equity appreciation bring money into United States. Equity depreciation moves money out of United States. Interest rates used to influence money flow, but it does not have the leverage any more.

So, Wall street ups Nasdaq and lowers Dow. A wash out on the influence of money flow.

In the mean time, FEDs lower the 30 year treasury bonds to buy back the national debt; which will lower the interest rates on 30 year fixed mortgage. Then the short term bills raised rates, so investors can park there temporarily. Monetary policy will be liberal, so that the economy can continue to expand. Further raising the overnight discount rate can theoretically tighten liquidity. But the commercial credit may overshadow the tightening, just be lengthening the credit from 30 days to 40 days.

This analysis is important for long term investing. So, Dow is now an unusual opportunity for loose cash to plunge in. Dow at 9000 is a good opportunity for daytrading to accumulate cash and do some long term investing later.

Tang fund should stand still and wait.
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