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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 694.04

+0.7%

Jan 9 4:00 PM EST

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To: Haim R. Branisteanu who wrote (44622)	4/1/2000 10:59:00 AM
From: Joan Osland Graffius	Read Replies (2) of 99985

Haim, >>Re: domestic money. We have IRA's which is small since people can only add $2000 per year and who knows when this is added. The 401K moneys are taken out of each pay check. A lot of 401k's today get deployed based on the individuals request for a percent going into certain funds. These people can generally change the deployment on a daily bases if they think a sectors are changing in value. The pension and trust money are managed by active managers and who knows what they are doing. Then, their is foreign money coming in and as far as I know they get thrown at the big houses like fido, etc. It is my opinion that J6P money in this market is not as big a percent of the money as most people think. It is getting bigger because government and corporations are moving from pension plans to actively managed 401k plans and if we have a serious correction I suspect this will change. My bottom line is the individual American really does not move this market, but he/she will pay dearly when stocks/credit instruments get back to fair value or lower. They will overshoot on the down side "for sure". I have been thinking about AG's interest rate increases and the Fed's constant increase of the money supply. The increase in money supply of course is done by the New York window of the Fed to keep the Fed Funds target rate at a certain level and there is definitely a huge demand for credit from the banks since the rate on a daily bases is over the target. AG seems to be concerned that the lending quality is lower that what he would like; and the only way he can fix that is to get the inspectors busy evaluating this quality. The bottom line here is the banks are willing to borrow at higher rates than the Fed target and until that gets shut down the money supply will increase. Obviously the borrowers from the banks are still willing to pay a higher rate for loans than the current Fed funds rate plus the spread. Where will it end, who knows, but a day will come when the banks can not loan the money and the New York window will have to start withdrawing money to keep the Fed fund rate stable. I believe this is the turn that is worth watching. Joan

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