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To: Les H who wrote (24184)	8/30/1999 8:08:00 PM
From: dennis michael patterson	Respond to of 99985

Hmmm. I wonder if we hit that "1320 area" today. If we don't get a bounce tomorrow, I'd be nervous. My ideal scenario would be a bounce tomorrow, followed by a strong open on Weds, into which I will sell. Then I'll see.

To: Les H who wrote (24184)	8/30/1999 8:17:00 PM
From: Les H	Respond to of 99985

FALL FISCAL DEBATE MAY PROBE FIRMNESS OF US SURPLUS ESTIMATES economeister.com By John Shaw WASHINGTON (MktNews) - When lawmakers return to Washington next week from their summer recess and begin re-engaging the White House on fiscal issues, one of the key points of contention is certain to be the solidity and firmness of budget surplus estimates. Republican leaders pushed a sweeping 10-year $792 billion tax cut plan through Congress in early August and are expected to send it to the White House in early September where it faces a certain veto by President Clinton. As reported earlier, Clinton on Monday renewed his veto pledge while on vacation in western New York State, saying he still favors a tax cut of some kind, but that the GOP bill would "overstimulate" the economy and lead to higher interest rates. In what promises to be a high profile veto ceremony, Clinton is certain to argue that it would be wrong to enact a massive tax cut before surpluses begin to accumulate. That message is consistent with arguments made by Federal Reserve Chairman Alan Greenspan in his July appearances before the House and Senate Banking Committees to give the Humphrey-Hawkins testimony. Greenspan said that while both the Congressional Budget Office and the White House used reasonable economic assumptions in preparing their new budget surplus estimates, there is still much uncertainty. Several budget groups have also sought to make lawmakers look more closely at these numbers. When the CBO released its revised economic and budget outlook on July 1, most of Washington seized on its remarkable bottom line: that budget surpluses over the decade would total a staggering $2.9 trillion and that $996 billion would come from funds that exclude Social Security. Lawmakers from both parties scurried to the microphones to take credit for the nation's remarkable fiscal turnaround. But few paid much attention to the cautionary words of the CBO or the fine print in its budget report. For example, the agency noted that "small departures" from its technical and economic assumptions could result in budgetary outcomes that are "substantially different from the projections even without changes in policy." It observed that if its economic projections proved overly optimistic or if health care spending resumed its once rapid growth surpluses could be significantly lower than expected. "The results for any one year that differ by as much as $100 billion from current projections are entirely possible," it said. And in the final paragraph of the report, the CBO noted that "demographic tensions loom in the not-so-different future." "After 2010, the retirement of the baby boom generation will pick up steam, bringing with it a greater demand for Social Security, Medicare and Medicaid benefits. Budgetary pressures caused by increased participation in such programs can easily reverse the favorable fiscal forces that are operating today," it said. The Center on Budget and Policy Priorities, a liberal research group, has argued that "a substantial majority of the surplus projected outside Social Security is essentially artificial because it depends on unrealistic assumptions that large, unspecified cuts will be made in discretionary programs over the next years." It argues the surplus estimates are based on the assumption that the discretionary spending caps will be maintained through 2002 and then adjusted only for inflation until fiscal year 2009. "This means the surplus projections assume levels of discretionary program expenditures for fiscal years 2001 through 2009 that are lower, when inflation is taken into account, than the highly unrealistic FY 2000 cap no one expects to be met," it said. "When the more realistic assumption is made that total non-emergency expenditures for the discretionary part of the budget will be neither cut nor increased, and will simply stay even with inflation, nearly three-fourths of the projected non-Social Security budget disappears," it added. The Concord Coalition also urged lawmakers to treat projections of huge budget surpluses carefully, saying it would be "the height of fiscal folly" to make big changes in budget policy based on estimates that extend for a decade. Several months ago even the GOP staff of the Senate Budget Committee tried to inject a touch of sobriety into the budget surplus mania that has swept Washington. In one of its weekly reports, the staff said both Congress and the White House should be very wary about making sweeping policy changes based on projections that extend more than a decade into the future. It said lawmakers and administration officials should be aware of the "fragility" of the new batch of budget surplus projections. "Be cautious budgeteers (and legislators) about major policy changes that are based on 10-year estimates, let alone 15-year estimates," it warned.

To: Les H who wrote (24184)	8/30/1999 8:20:00 PM
From: Challo Jeregy	Read Replies (2) \| Respond to of 99985

Les, There is support near the 1320 area on the September S&P's and a potential bounce could set up from that level. Today' s low on the September S&P's was 1324.00. If a bullish signal were generated, we would look for a bounce to the 1350 area. What does the Sept S&P 1350 correlate to in the s&p cash?

To: Les H who wrote (24184)	8/30/1999 8:22:00 PM
From: Les H	Respond to of 99985

TALK FROM THE TRENCHES: DATA, CORPORATES ADD TO TSY WOES economeister.com By Isobel Kennedy NEW YORK (MktNews) - U.S. Treasury prices are moving lower for the fourth session in a row. There was nothing coming from Fed officials in Jackson Hole that gave the credit markets any comfort. In fact, the absence made this week's slew of data releases all the more important. And fear of a huge corporate/agency calendar is also taking its toll, sources say. The biggest diva of them all, the employment report comes out Friday. The range of estimates for August payrolls is not unusually wide at +165k to +275k with the median at +215,000. But one advisor says the Treasury market could show more volatility than usual in this pre-holiday thinned week because expectations about the strength of the labor market may evolve before Friday. Other labor-related data trickles out during the week including labor market surveys, initial claims and revised unit labor costs data. Estimates for how much sister market supply could emerge in September are anywhere from $40 billion to a whopping $60 billion. Fears that Y2K bugs could mess things up in the fourth quarter, encouraging issuers to get their financing done by the end of September. Too much U.S. corporate and agency supply hurts U.S. Treasurys in several ways. One, if spreads widen the sister market paper looks more attractive to investors and retail is already believed to be sidelined in Treasuries anyway. Two, it creates rate-lock selling where corporations sell U.S. Treasuries as a hedge against higher interest rates down the road. Three, buyers of spread product often sell Treasuries outright to make room for the new paper. Or they sell Treasuries or other spread paper on swap. In either case, corporate traders will in turn sell Treasuries as a hedge against the paper they take in on swap. Along these lines, Salomon Smith Barney's weekly Bond Market Roundup says "Fundamental value is out of fashion in Treasuries, which have become a source of liquidity. Liquidity premiums are high but could abate temporarily with upcoming spread product issuance." They recommend looking at liquidity-driven relative-value opportunities in off-the-runs. Another reason for today's market weakness may just be profit taking by the dealer community. After all, using the old "bulls, bears and pigs" philosophy, why not just book some more profits now? New fives, 10s and bonds are currently trading around 5.84%, 5.94% and 6.04%. Pretty respectable gains from the respective auction levels of 6.014%, 6.085% and 6.144%. The market was expected to receive some support from month-end index fund buying and this month's extension was expected to be longer than normal due to the August refunding. Alas, some of that buying occurred as early as last Wednesday, sources say, so any buying tomorrow may be short-lived indeed. There was some hope that the two-year note might get some support on flight-to-quality buying from the ongoing Latin American troubles. But right now, it looks like the market is strictly focused on U.S. domestic matters, traders say. And right now, players think the note came under pressure right out of the gate this morning because the Street was long the short end ... not a good thing going into potentially damaging economic data. And there were some hopes that Mr. Greenspan's warnings about strong stocks might spur some asset-allocation buying of short U.S. Treasuries. Stocks are lower all right but there have been no reports of any money coming into Treasuries. Speaking of stocks, the DJIA has given back about 300 points from its record high close of 11,326 on Aug 25. By the way, that was the day after the Fed hiked rates. And while conventional wisdom might suggest you heed Uncle Al's warning, "the bull is alive and well" according Abbey Joseph Cohen in this week's Barron's. She says the stock market is only in a range of 5% overvalued to 5% undervalued, hardly the excess expected at market peaks. She is expected to release new, and presumably higher, targets for broad stock indices after 2Q earnings results are in. And she is also calling for the Fed to hike rates again at the Oct 5 FOMC meeting. The market may be free of any more Fedspeak until Sept 8 because of the upcoming Labor Day holiday and blackout restrictions surrounding the FOMC meeting. But since Y2K is spooking everyone it might be refreshing to hear what SF Fed President Parry has to say on the subject when he speaks on Sept 2. Mr. Greenspan will also speak on Y2K on Sept 17. Nothing much new came out of the rest of Jackson Hole. But observers say a weary BOJ Deputy Gov Yamaguchi listened intently to calls from the international community for more Japanese stimulus but rejected the idea; IMF #2 man Fischer suggested the Fed raise margin requirements to counter U.S. stock price gains, and a BOE official suggested the Fed adopt an explicit inflation target like the BOE. Don't bank on the Fed for the last two. Over in Singapore, at the 5th Manila Framework meeting, Japan officials warned about excessive appreciation of the yen. A People's Bank of China official gave assurances that the yuan will not be devalued. Now international officials have moved on to the G7 Deputies meeting which takes place in Berlin today and tomorrow. No statement is expected to be released following the meeting but it is pretty safe to assume the yen will be one of the "routine" topics discussed. A meeting of G-7 finance ministers will take place in Washington D.C. later this fall. Wall Streeters in London had a bank holiday Monday. Or did they stay home because the Liverpool city council declared today "Yellow Submarine Day" in honor of the 30th anniversary of the Beatle film? NOTE: Talk From the Trenches is a daily compendium of chatter from Treasury trading rooms offered as a gauge of the mood in the financial markets. It is not hard, verified news.