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To: JRI who wrote (138177)	7/31/1999 3:42:00 AM
From: TTOSBT	Read Replies (2) \| Respond to of 176387

You probably hit more truths than any. Elaine Garzarelli said almost exactly that on CNBC Friday morning, "real" interest rates should be at 5% or lower long term. She also said however that she things Greenspan will raise 1/4 point August 24th and we will have no more than a 10% correction. Also inflation will only rise 2.5% this year which will cause the 5% or lower rates. I think I got most of that correct but there is a sight Garzarelli.com garzarelli.com TTOSBT

To: JRI who wrote (138177)	7/31/1999 6:46:00 PM
From: Lee	Read Replies (2) \| Respond to of 176387

Hi John,.Re:.that we will see lower rates (down to 5.50%..maybe even a tick lower) between now and end-of-year John, I think you have a good case for lower rates through 'flight to quality' buying in our treasuries due to Y2K concerns in SE Asia. But it's also dependent on the dollar I think. The dollar needs to regain it's strength. On your specific points. 1; The Fed not willing to move on rates until after Jan. 2000. I agree with what Lyle Gramley said the other day on CNBC and that was that he thinks the board was fairly split between the hawks and doves and once they raised rates on June 30th, the give back was to go back to a neutral bias. That move wiped out any benefit the hawks hoped to achieve by raising a quarter percent.<g> I think AG specifically wants to view data as it comes out and make a decision based on what the data show. He stated this several times over the last week. 2. On weak recoveries around the world - I don't know if they will be weak since just last week both Germany and Japan came out with better than expected numbers. These better numbers might also have something to do with the selling going on in the dollar. We might have to just wait and see from the numbers coming out. 3. Good possibility that a lot of cash will be parked in our treasury market during the 4th quarter because of Y2K concerns abroad. 4. Current bond spreads has a lot of people worried. Bill Gross of PIMCO is watching closely as is Alan. Both mentioned this last week that spreads were widening like last fall and this indicated a risk. If this continues, the Fed won't be able to tighten credit further. Besides, during all this talk of tightening over the last several months, the Fed has been at the discount window every day ADDING reserves. And this is adding more than what is necessary to keep the 5% fed funds target. So they might be saying one thing but they're certainly doing something else. IF they were really serious about tightening, I would think they would be draining liquidity.<g> What is going on anyway? 5. We differ on the slowing economy signs.<g> I don't think we're slowing much at all. And if Germany and Japan and others are recovering, our companies are in the best position to prosper from additional business. In fact, I'm looking for even better 3rd and 4th quarters.<g> Don't have a clue what rates might be between now and end of year but for a guess it would be around 6%. And don't think a juicy rumor about Y2K occurring in 2001 is going to do anything to alleviate 2000 events. <vbg> Did you happen to see the Braves game last night? First Cox gets thrown out then Smoltzie, then Eddie Perez? Couldn't believe all that was going on! And the Mets are first in the EAST!!!! Best, Lee