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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: bobkansas who wrote (18144)	1/6/2000 7:03:00 PM
From: Joe Smith	Respond to of 57584

They took another chunk out of WPJPX agin. Now done 17% from high...

To: bobkansas who wrote (18144)	1/6/2000 7:17:00 PM
From: Joe Smith	Read Replies (3) \| Respond to of 57584

Hoping for a sell-off tomorrow to re-enter some swing money. But, very selectively at first. I do think there is a lot of cash waiting to cause a rebound. But how long will they wait???? Behind all of this fear and greed is that big sucking sound of Al G. removing liquidity from the banking system. While everyone is waiting to see if he will act in February, let me assure you that he already has. The Brinks trucks have pulled up and made their withdrawal. I remember a time when the money supply was a key figure. Now it is mostly ignored in favor of the discount rate shenanigans. I was quite mistaken, along with others, expecting this correction in December. Why did it not occur then? Because Al G. pumped this system with liquidity. I made the mistake of focusing on the Discount rate, expecting that the 6+% bond would take the air out of the market, while kind of ignoring the money supply. WRONG!!!! During the Asian crisis, Alan G. pumped the system with money and dropped the rates 75 basis points. This time, he did not change the cost of money but he did increase the money supply. So there is more money at the bank but the wholesale cost of money to the bank is the same. So, why would demand increase and outflow increase if the wholesale price of money is unchanged? Because, just like a retailer, if a bank is fully stocked with its product, money, the bank is going to find ways to sell that product. That means, being willing to lower margins and perhaps loosen lending practices. The money is going to go out the door REGARDLESS OF PRICE. So it is not the discount rate but rather the supply of money that seems to regulate its flow in this case. The rally after the Asian crisis also followed the increased supply rather than the 75 basis point drop in rates, IMHO. Now, money is in much tighter supply. The bank will ask for more for it even though their cost will be the same. And their lending practices will become much more conservative. Less money will go out the door. I missed the effect of Money supply on the December market. I will be very cautious of its effects on the January/ February market. The good news is that it is already happening. If there is a tightening in February, that will mark the end of a troubling period, I believe. Finally, William has warned us about the long-term health of the banking system. The money liquidity orgy we have seen adds another bit of weight to the house of cards. Nothing to worry about, for now...... This reminds me a lot of the 80's. Then, they were borrowing money and reinvesting in junk bonds. Now it is junk IPO's <g>