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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: MrGreenJeans who wrote (5399)	5/27/1999 1:19:00 AM
From: marc ultra	Read Replies (2) of 15132

MrGreeenJeans re<<<<<< o what is the possibility Greenspan raises rates to dampen equity speculation? To prevent a stock market bubble?? To slow down the wealth effect??? That in my mind is the wild card tonight.etc. >>>> Excellent post. The reason I think the chances are strong for a rate rise is that I think the Fed is looking at things from a different perspective than most here. Rather than thinking just in terms of preventing a bubble they may be thinking in terms of having CREATED a bubble by the extreme steps they took last year to prevent a meltdown and this huge liquidity they flushed into the system causing extreme overvaluation on their stock market models and an economy that has not slowed to the 2% or so level they were expecting with continued extreme tightness in the labor market etc. Thus I think they may feel it may be their duty to correct some of the excesses they have wrought since waiting any longer may cause them to have to push the economy into recession to slow it down. I also think the ECI may start rising as we have HMO's losing popularity and health care costs may be on the rise. Finally the great "surpluses" as far as the eye could see which helped keep bond rates down is evaporating in the short term due to Kosovo which will continue to be a big expense if we are successful in moving the Kosovars back to some extent which will require a major NATO or international force for a long time. One question I have that maybe you or someone else can answer is what year was it that the Fed brought the Fed funds rates down to 3% due to the S&L crisis? If it was a bit prior to 1994 it would be good example of the Fed bringing rates artificially down due to a crisis only to have to raise rates vigorously when the crisis eased. I don't recall the years so this may be irrelevant Marc

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