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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (66626)	8/22/1999 8:54:00 PM
From: Thomas M.	Read Replies (1) \| Respond to of 132070

Some good stuff from the Market Watch section of Barron's: interactive.wsj.com The Richebacher Letter 1217 St. Paul St., Baltimore, Md. 21201 AUGUST ~ We continue to hold the view that the major risks to the world economy lie not in Asia, Latin America or Europe, but in America, more precisely in the American bubble economy. If the U.S. credit and stockmarket bubble bursts, it means disaster for the world economy, not unlike 1929. It is the magnitude of the credit excesses and the sheer recklessness of financial behavior that sets the U.S. experience apart from anything before. . . . If American stocks did put in their highs in mid-July during the height of earnings reporting season, one can give considerable credit to the powerful Wall Street propaganda machine. Spin now has it that corporations are in the midst of an earnings and technology-driven productivity explosion. With interest rates rising, the many beneficiaries of the great American bull market are pulling out all the stops to perpetuate the bubble. Anticipation of double-digit earnings growth was the justification given to the new bull run of the stock market. The dramatic surge in tech stocks was definitely exacerbated by derivatives and heavy short covering. We, however, tend to assign greater importance to the recent poor performance of the financial stocks as indicators of increasing American financial vulnerability. Meanwhile, the ongoing bear market in U.S. fixed-income securities overshadows faltering stock prices. As selling pressure developed in the bond market, the ''middle of the curve,'' particularly with five- and 10-year Treasury notes being extensively used for hedging and derivative strategies, has suffered the most acute losses. In addition, spreads are widening across the board. Increasing spreads for the debt of the money-center banks and brokerage firms give a clear sign of heightened risk perceptions. The precarious point is that a security-issuance boom of unprecedented proportions is hitting a market that, in the absence of new savings, depends completely on new leveraging -- that is, on short-term borrowing-as a source of funds. Consider that since Greenspan's bailout early last fall, about $1 trillion of new securities have been issued, of which the vast majority are now ''under water.'' Additionally, there is a mad rush to securitize asset-backed and mortgage-backed paper. With liquidity faltering, yields are poised to surprise on the upside, with spreads certainly widening further. -KURT RICHEBACHER Insiders' Chronicle 61 Broadway, New York, N.Y. 10006 AUGUST 2 ~ Much of the insider activity we're seeing these days is the result of aggressive options exercises and the subsequent disposition of the underlying shares. Surely, some of this money must be making its way into the real economy. The potential trickle-down effect is enormous. Consider some of the companies showing the greatest volume of insider sales this year. Through June, Microsoft insiders have sold over $3 billion worth of shares. Qwest Communications insiders have raised over $1.7 billion; Dell Computer insiders, $939 million; Hewlett-Packard insiders, $375 million; Citigroup insiders, $313 million. With over $6.3 billion being raised by true insiders at these companies, one can only imagine what the number would look like if all option-holding employees were required to report! . . . Just imagine the potential spending power of all existing option programs. Used to be that the surest way to hyper-inflate an economy was for a government to print money -- perhaps that has changed. -BOB GABELE