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Strategies & Market Trends : Asia Forum

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To: Zeev Hed who wrote (4509)	6/14/1998 2:37:00 PM
From: Gersh Avery	Read Replies (2) of 9980

Zeev .. since you mentioned liquidity One more item to consider: The US Federal Reserve The foreign investment in bonds lowers interest rates .. OK so far. Excess liquidity flows from bonds into stocks .. OK Stocks go up as a result of our liquidity driven market getting another fix .. OK Now then .. interest rates have lowered below the Fed target of %5.5. So what do they do? Drain liquidity to maintain the target rate. How much do they drain? However much is required to hit the target. Where does the liquidity come from? Thursday was an example. There was a liquidity margin call that went out. Again, I think that there is a real danger of the two economies being linked in a very bad way. Gersh

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