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Strategies & Market Trends : Asia Forum
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To: Jay who wrote (459)1/5/1998 1:25:00 AM
From: Rational  Read Replies (1) of 9980
 
Jay:

Dropping interest rates should have worked but for the reason that it will make US stocks still more attractive bringing in more overseas funds. I think the reduced rate (with .5% cut) will continue to remain higher than the Japanese rate.

Somehow US stocks will have to appear less attractive to investors to pull out their money to Asian markets. The situation is quite complicated for the Fed because of a decline in corporate profits due to overcapacity and competition everywhere; except that most investors in the US are still not believing it.

Thus, the Fed may simply apply the gradual increase in money supply, while waiting for the erosion of US corporate earnings makes US stocks less attractive. [Recall Greenspan's irrational exuberance comments; that did not work since money from everywhere continues to flow to the US to prop up insanely bubble stocks.]

Sankar
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