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To: John Hunt who wrote (39043)	8/15/1999 3:55:00 PM
From: Alex	Read Replies (1) \| Respond to of 116767

Greenspan eclipse: world coming to end, maybe WALL STREET By BRIAN HALE The solar eclipse lasted less than a day and only affected a small part of the globe, but Fed chairman Alan Greenspan's shadow is darkening world financial markets for weeks. Nor is there any guarantee that the skies will lighten when the Fed's Open Market Committee lifts interest rates by another 25 basis points next week. Everyone is still going to debate whether or not a follow-up increase is likely unless the committee takes the unlikely step of making its views very clear. Of course there is an outside chance that the Fed will go for a full half-per-cent right off the bat, but very few experts think this is likely. For a start the US economy isn't showing the early signs of rampant inflation that would warrant such a dramatic move but the downside risks to a 50-basis-point increase would probably tip the scales against it even if there were a little evidence. On the domestic front such a move could spark a far more savage correction in the sharemarket than the stealth bear market that has been clawing away since the start of the year. That might not worry Dr Greenspan in itself but the dominoes never fall alone in financial markets. A plunging sharemarket would probably spark a plunging US dollar that would quickly put paid to the fledgling economic recoveries in Asia and Europe. Closer to home, it might also cause havoc in Latin America. The International Bank Credit Analyst says it wouldn't take much to prompt another crisis in Mexico or, more likely, Argentina or Brazil. It says that while Asia's economic recovery has been impressive it "is by no means assured" and with Asian banking systems (including China's) still in disarray and saddled with an enormous stock of bad debt ..."a major move in world credit conditions could easily prompt another crisis and a flight to quality". Then there is the impending end of the millennium or, more to the point, the Year 2000 problem for computers. It wouldn't be surprising to see the world's dominant central bank go on to the back foot after its next meeting while the world and its financial markets sort their way through the pre and post New Year's Eve hangovers. Whither the bond market, thither the sharemarket, as William Shakespeare might have said if he had been a Wall Street strategist at least last week. The first signs of muted recovery in some sectors of the sharemarket on Wednesday were quickly strangled on Thursday when the 30-year portion of the Treasury's latest bond auction proved disappointing. To be fair, the volume and breadth were not exactly staggering even before the auction result, and the indices were doing their usual nice job of giving misleading readings on the health of the market. But even the most watched indices lost their gains as Treasuries stumbled and the bellwether 30-year long bond's yield rose to a high of 6.27 per cent its highest for 22 months. Only some of the Internet stocks managed to hold on to a larger share of their earlier gains. Cynics would say that, perhaps, was not surprising given that many of them had already plunged 70 per cent over the past month or so anyway, but ever-bright optimists were hailing it as the bottom of this summer's tech wreck and saying how the market now was pricing "quality" in Internet stocks. The term goes largely unexplained, as indeed it must when talking about hugely loss-making but largely small businesses with still oversized market capitalisations which are about to get whacked as the bricks-and-mortar giants turn favourite again but, well ... it's all a giggle anyway, isn't it? Surely no-one ever really believed that investors were buying Net stocks to salt away under the mattress against the day they all turned into the next Microsoft? Didn't everyone realise that it was just a variation of the old pass-the-parcel game involving an attempt to get left with handfuls of dollars and not the parcel of shares when the music stopped? Apparently not. Some analysts are still trying to blame the devastation in the Internet sector on interest rate worries rather than "investors" desperately shucking their Net gambles before the music stopped. But they never explain why, all of a sudden, worries about something happening in the real world (particularly a quarter of a percentage point rise in interest rates) should wreak more havoc on cyber world stocks than Cyclone Tracy. But it's high summer. May be it'll all start again when the holidays are over. smh.com.au