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To: Alex who wrote (37055)	7/12/1999 6:39:00 PM
From: Rarebird	Respond to of 116770

Repeat of Last Fall on the Horizon? Monday July 12, 5:22 pm Eastern Time US dollar swap spreads widen on flight-to-quality bid CHICAGO, July 12 (Reuters) - U.S. dollar swap spreads widened on Monday amid a flight-to-quality bid sparked by troubles in emerging markets, traders said. Weakness in Argentina's and Brazil's stock markets, as well as rumors that China could devalue its yuan, encouraged investors to park funds in the relatively safe haven of U.S. government securities, which pushed swap spreads higher, said a New York-based swaps dealer. ''There was a flight-to-quality trade today,'' the dealer said. ''We saw Argentina bond spreads were wider by several hundred basis points and the Brady bonds that they have were wider by about 80 basis points.'' Monday's dealings marked a different type of flight-to-quality than was seen in recent weeks due to concerns over U.S. Federal Reserve manipulation of interest rates, the dealer noted. ''With all these concerns about China, it was basically a reverse of what's been going on, where today was more of a flight to quality in the more traditional kind of sense,'' he said. The benchmark 30-year cash T-bond was up 1-1/8 points at 90-28/32, yielding 5.91 percent in late trade. Swap spreads widened early, first due to the continued tightness in 10-year repo, traders said. Despite the increased interest in swaps, one trader said volume was below average. Among Monday's potential swap candidates was a $750 million five-year bond from Bank Nederlandse Gemeenten (BNG), expected to price Tuesday. Bank One Corp (NYSE:ONE - news) plans to issue a $2.0 billion two-tranche fixed-rate global bond sometime this week via Morgan Stanley Dean Witter and Bank One Capital Markets, the lead managers said on Monday. Ten-year swap spreads added 3-1/4 basis points to finish at 88 basis points, mid-market. Seven-year spreads widened by 3 basis points to end at 82 even. Five-years were up 3-1/2 at 75-1/2. Three years were up 2 basis points at 63-3/4 and two-years were up 2-1/4 at 51-1/4.

To: Alex who wrote (37055)	7/12/1999 7:23:00 PM
From: Rarebird	Read Replies (2) \| Respond to of 116770

Gold Carry Trade: Once the POG rallies the carry positions will become unprofitable, and will trigger other carry positions' stop losses, leading to a sudden sharp rise in the POG. This is what happened to the Yen carry Trade ( which was in the billions of dollars ); the dollar went from 147 to 107 yen in just a few weeks before doing a partial retracement. The Gold carry Trade does not in any way affect the supply or the demand for Gold; that is why it has no long-term effect for shareholders. The gold which is being borrowed must be paid back. In fact, the gold carry trade is actually long term positive for gold, since it guarantees that a substantial amount of gold must be paid back each month over the next few years. Once the price rises and the borrowing is heavily scaled back, these monthly paybacks will be a steady source of upward pressure on the gold price, since the borrowers will have to find this gold somewhere. Gold Bears are fond of quoting Chairman Greenspam's comments last summer that " the Central Bank will lease more gold ( to be dumped on the market ) if the POG rises" as the REASON for capping any major Gold rally. This threat is the equivalent of a Parent promising to punish a child severely if the latter does something immoral against its will. How often is the threat actually carried out in its severe form if the child disobeys? Seldom. Make no mistake about it: The Bears view Gold as CURRENCY- even if it is a currency of " last resort." The Bearish case for Gold hinges on the continued strength of the Dollar- even though it has lost 90% of its value since 1800. Once the dollar resumes its downtrend in the second half of this year, there is Nothing- and I mean Nothing that any CB can do to prevent a dramatic rise in the POG- the Shiny Yellow metal would spit in its face as the dollar fell. As a shrewd Central Banker, Greenspam ( along with other CB's ) would Buy Gold aggressively as the dollar resumed its decline. These guys are pros. It's all a game to them to prolong the Bubble. But they know deep down that the " endgame" is very near at hand. So is a Bull Market in Gold.

To: Alex who wrote (37055)	7/14/1999 8:11:00 PM
From: goldsnow	Respond to of 116770

Hedge funds favor Japan's outlook Selling AOL, WorldCom and buying wireless in Asia By Emily Church, CBS MarketWatch Last Update: 3:59 PM ET Jul 14, 1999 Econ.forecast Banking stocks NEW YORK (CBS.MW) -- Some U.S. hedge funds are buying into the Japanese recovery, betting its economy has bottomed out, and one manager has sold U.S. large-cap stocks as part of the shift. If investors only pay attention to "the sell-side analysts and Western press, you would think Japan was on the verge of collapse," said Raj Gupta, who manages the Epoch Funds and G10 Macro Group. "The sleeping giants are finally beginning to wake up and are prepared to join in the spending boom," he said, referring to consumer confidence in Japan and Europe as well. It's been less than a year since the Asian economic crisis roiled the world's stock and credit markets, slamming the hedge funds. Yet the near 33 percent year-to-date rise in the Nikkei is proof of foreign investors' change in sentiment toward Japan, even as most commentators note that the Japanese themselves remain net sellers of Japanese equities. Seeing green Japan's fiscal stimulus package has sown the seeds and "the green shoots of recovery are becoming evident," Gupta told a room of fund managers at a Managed Funds Association conference in New York. "It's a dangerous time to bet against the Japanese economy." The health of the Japanese economy is the subject of great debate among economists, with many U.S. commentators skeptical about the banking sector's drag of bad loans. "There's quite a difference of opinion about the outlook for Japan," said Josh Feinman, chief economist at Deutsche Asset Management Americas. "Asia is picking up and that should be beneficial for Japan ... yet a lot of people think the structural changes (in Japan) have a long way to go. "Japan's economy has been doing better than it has in a year," he said. "It's a question of degree. Has it really turned the corner and is headed toward a self-sustaining recovery?" Year-to-date, the average global hedge fund was up 10.7 percent through the end of May, according to Van Hedge Fund Advisors International. Non-bank play In the first quarter of this year, David Gerstenhaber, president of Argonaut Capital Management, said he began a portfolio adjustment, suspecting that "global economic growth would surprise on the upside" after a round of global central bank easings. As a result, their exposure in Japan has climbed from near zero as a percentage of net asset value to a top of 35 percent, he said. In common stocks, Gerstenhaber looked for companies he labels part of "the new Japan." In other words, the Argonaut funds stayed clear from manufacturers and banks. Nikkei composites weren't well represented. The funds invested in non-bank financials like Takefuji, which lends to consumers and the Shokoh Fund. Other plays include deregulation and technology, leading to telecom giant NTT (NTT: news, msgs)'s NTT DoCoMo majority-owned wireless subsidiary and Mitsui Petrochemical. The Asian bet has taken Argonaut to Korea and "cheap financial assets" like Pohang Iron and Steel, a low-cost steel producer, and several Korean banks. The funds have returned 37 percent year-to-date. AOL out of favor Last fall, Argonaut moved into large-cap stocks and Internet stocks like America Online (AOL: news, msgs), Cisco (CSCO: news, msgs) and MCI WorldCom (WCOM: news, msgs), looking for the names to deliver topline growth and to absorb liquidity as the Federal Reserve pumped it into the system. Beginning in the second quarter of this year, it was clear to Gerstenhaber that the "mania" in the Internet stocks "was not justified by the underlying fundamentals." Moreover, a stuffed, Net-heavy IPO calendar was raising concerns "at the same time of renewed global growth." As a result, Argonaut began selling some U.S. holdings at the end of the first quarter and "aggressively in the second quarter," he said. Among those sold: Pfizer (PFE: news, msgs), AOL and WorldCom. Among those bought: Alcoa (AA: news, msgs), Dow Chemicals (DOW: news, msgs), Halliburton (HAL: news, msgs), Ingersoll-Rand (IR: news, msgs) and Noble Drilling (NE: news, msgs). Gerstenhaber told the money managers that he also liked Smurfit-Stone Container (SSCC: news, msgs), saying that liner board is a play amid improving global demand, as well as semiconductor makers Micron (MU: news, msgs) and National Semiconductor (NSM: news, msgs) and Teradyne (TER: news, msgs) and Novellus Systems (NVLS: news, msgs) on the chip equipment side. He expects a European upturn "to be more muted," and is invested in Nokia (NOK.A: news, msgs) and Mannesmann and Vodafone (VOD: news, msgs) among others. Doubts remain Not all fund managers are keen on Japan, noted George Van, chairman of the fund advisor group. "There's still a lot of caution, even if there is a glimmer of optimism. Some of them got burned on the yen-carry trade and that hurt the macros," Van said. Some of the U.S. funds are linking forces with Japanese banks and are getting directly into restructuring by buying bad debt at a discount. With a yen-carry trade, investors take advantage of near-zero short-term rates in Japan by borrowing yen and buying higher-yielding assets like Treasurys. Many of those trades were "unwound" in June when the dollar and Treasurys fell. Also see Bond Report. cbs.marketwatch.com