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To: Bobby Yellin who wrote (38937)	8/13/1999 8:08:00 PM
From: Rarebird	Read Replies (1) \| Respond to of 116796

Armstrong is advising investors to pull out of Japan, Asia and the EC; SPECIAL REPORT ON STOCKS (basis S&P Futures, Sept contract) by Martin Armstrong, chairman of Princeton Economics August 13th, 1999 Today's reaction in the stock market, although impressive on the surface, still has not changed the longer-term outlook. A rally into next week may form only a reaction high with resistance at 1357 and 1365 (basis S&P Sept contract). Support should form initially at the 1319 level and a closing back below that level on a weekly basis will signal a resumption of the downtrend. An overall decline into January of 2000 appears likely with a minimum target objective of 1215 and ideal target objective of 987 to 930. We do not expect this decline to be rapid as was the case last year but we do see more of a persistent grinding downward movement for the majority of the period. Problems in Russia, China, North Korea, and India, combined with a high probability of a major financial crisis in Japan on top of Y2K, will keep the fundamental picture questionable at best. In Japan the FSA investigation of CSFP has exposed just the tip of the iceberg of perhaps the worst derivatives loss program in the history of modern financial markets. We now see hidden derivative losses in Japan may far exceed $10 billion. Some banks were using derivatives to meet BIS requirements and to disguise bad loans. An insolvent postal savings fund and the major booking of derivative premiums as current year profits instead of mark-to-market, have left this economy in an extremely vulnerable position. Despite foreign optimism about a possible Japan recovery, concern and pessimism still dominates the domestic Japanese markets. Additional losses arising from the convergence trades in Europe have sparked rumors of billion dollar losses among hedge funds and investment banks. The problems with the convergence trades in Europe have sent the credit spreads into a tail-spin worse than October of last year. All these things combined warn that a serious correction may develop beginning in September. We recommend reducing risk exposure by taking advantage of reaction rallies.

To: Bobby Yellin who wrote (38937)	8/19/1999 12:25:00 AM
From: PaulM	Read Replies (2) \| Respond to of 116796

Agreed all around. Re: Sacrificing the Real Economy to Financial Markets, Bloomberg reported today an explosion at Poland's largest oil refinery. This follows story after story about oil refinery fires and other malfunctions here in the U.S. This isn't all just coincidence. What it is is another example of insufficient expenditure on basic, crucial infrastructure resulting from artificial pricing. There appears to be UNDERcapacity in much of the petroleum industry in Europe and the U.S. (and refiner profits are still non-existent), and this undercapacity will likely cause huge problems in the coming years. By contrast, the mutual fund industry provides more mutual funds than there are stocks trading on the NYSE.