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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RWS who wrote (25587)	9/13/1999 9:10:00 AM
From: pater tenebrarum	Respond to of 99985

RWS, as it were, this latest twist in the liquidity story points to a phenomenon that has become ubiquitous throughout the system - as the credit bubble expands, the quality of the credit becomes ever more impaired. now the Fed joins the fray by accepting lower quality paper for repos...why am i not surprised? however, the overall liquidity picture has become somewhat erratic, with money supply growth dwindling somewhat this year. it is possible that the Fed will slowly come to realize that the coupon passes (which are set to hit a fresh record this year) find their way immediately into the stock market...on Friday, the Fed has drained liquidity for the first time in ages by selling some of the coupons back. btw, i'm on record of predicting a blow-off ever since i first posted on this thread - let me add that i am not 100% certain that we will get one, i merely pointed out that the history of prior investment manias argues for such a scenario. a powerful argument in favor of a blow-off is precisely the liquidity excess that has been so pervasive up until now, coupled with the psychological momentum inherent in the mania. what usually happens, is that the blow-off progresses while the underlying fundamentals have already begun to deteriorate - the market ignores them until one day everybody realizes the lunacy of it all at the very same day.... regards, hb