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Strategies & Market Trends : Roger's 1998 Short Picks
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To: blast_investor who wrote (17401)2/12/1999 2:14:00 PM
From: Oeconomicus   of 18691
 
Henry, you are right, IMO, about interest rate worries effecting the market right now. The bond market is getting killed today. However, I think you are wrong about the prospects for the Fed raising rates in the near term. The rest of the world is still too fragile and there are still no signs of impending inflation in the US. If anything, deflation is still a bigger risk than inflation. I think this is a buying opportunity for bonds - that is, this rise in rates in the Treasury market will not hold. How far rates go before they reverse I don't know, but I do expect to see 5.0% on the long bond again before we see 6%. Would a half point rise in long rates with no rise on the short end kill the market? Not by itself, IMO.

Later in the year, like Roger suggested, their is greater risk. Y2K fears will not only cause people to worry about their exposure to systems failures and the like effecting the companies they own. These fears could also seriously effect the Fed and Treasury's ability to manage liquidity in the financial system. I heard the other day that the printing presses are going full speed to print all the extra money people are expected to withdraw from their banks "just in case". I'll admit I plan to hit the ATM harder than usual before year end. What will happen as a result of all that money coming out of circulation to be hidden under mattresses for a week only to go right back into the bank when the world doesn't end?

We live in interesting times, no?

Bob
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