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To: Crimson Ghost who wrote (38122)	8/1/1999 9:29:00 PM
From: Winzer	Read Replies (1) \| Respond to of 116764

<<On the other hand, citizens would do well to remember the savings and loan fiasco and the junk bond spree of Ivan Boesky and Michael Milken in the 1980s. The good times rolled then too, until the party came to a screeching halt and the big boys ran off without paying the bill. >> Good parallel, of course by the time the shiq hits the fan the Deomons would be out office and the Repos would be back to business as ususal. Winzer

To: Crimson Ghost who wrote (38122)	8/4/1999 8:14:00 AM
From: Rarebird	Read Replies (2) \| Respond to of 116764

Parallels with the nasty summer of '87 By Stephen Wyatt A volatile cocktail is being mixed in financial markets. Crude oil closed in New York at 20-month highs on Friday, the base metals are recovering from massive Asian-induced losses, world equity markets are at or near record levels, inflation and interest rates are near levels not seen since the 1960s, a tight US job market exists, the US trade deficit is at record levels and, in the midst of all this, the US Federal Reserve Board chairman, Dr Alan Greenspan, is warning that the Fed is now especially alert to inflation risks. While US inflation is not showing any immediate signs of rising, with core US inflation running at just 1.6 per cent over the first six months of this year a 34-year low the strong US dollar is taking its toll on the US export sector, especially the politically important agricultural sector. US farmers are being crushed by low agricultural commodity prices. Unlike growers in Australia, whose prices have been boosted by the weaker Australian dollar, US producers confront the full impact of the low US dollar denominated agricultural markets. This is one of the reasons for the rising US trade deficit. A number of analysts are questioning whether now is the turning point for the US dollar, whether its bull move, underway since early 1995, is coming to an end. Some are even suggesting parallels between now and back in 1987 when the last sharp correction in stockmarkets occurred. "The world rarely turns on a dime. But this could be one of these times," says Mr Stephen Roach, chief economist at Morgan Stanley Dean Witter in New York. The rising US trade deficit and upsurge in German business sentiment are taking "the glow off the once sparkling US dollar ... is this the summer thunderclap that might bring an overvalued US equity market to its knees?" he asks. "All this is strikingly reminiscent of the pyrotechnics of a hot summer some 12 years ago. As the trade deficit widened in 1987 and the dollar continued to fall, Fed tightening became the only answer," Mr Roach said. "For the record, the US stockmarket is today just about as richly valued as it was in the nasty summer of 1987." A reversal in the US dollar would impact on the value of the Australian dollar. Most probably the Australian dollar would firm against the US dollar. Australian exporters might then have to confront the difficulties that US exporters are currently facing. When the Fed tightened in 1987, the Australian dollar firmed from US64¢ to US73¢, and as commodity prices picked up, partly on the back of a weakening US dollar, the Australian dollar continued to rise to US89¢ in early 1989. But this did not cause undue hardship to Australian commodity exporters. Back then, all commodity markets were strong. In fact, commodities were booming. Grains were rallying, with soya beans at record levels; base metals were at historic highs; oil was more than $US20/barrel and gold was at $US475/oz. But today, while industrial commodities like the base metals and oil are flexing their muscles, the agricultural markets are still weak. These agricultural markets are generally in a state of chronic oversupply. Sugar, cotton and oilseeds stand out. If 1987 were to repeat itself if the US dollar did begin to slide lower and the Australian dollar to rally Australian agricultural producers would lose the currency subsidy, a subsidy of more than 30 per cent that has enabled many of them to survive. This is especially so if US dollar industrial commodity prices like copper, crude oil, aluminium and nickel continue to rise. Their strength would boost the Australian dollar. Australian rural commodity prices have fallen 10 per cent in the past six months, and that has been when the Australian dollar has been trading a US64¢-67¢ range. The National Farmers Federation's director of economic policy, Mr Todd Ritchie, said that if the falls were sustained, Australian rural incomes could drop by around $US2 billion. At this stage he expects this weakness to continue. afr.com.au