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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (30501)	1/20/2000 7:55:00 PM
From: Kona	Read Replies (1) \| Respond to of 50167

<core NDX keeps making new high the yields move back up and more ferociously setting for a big fall.. so that scenerio I am working on.. > Ok you know the next question, how big a fall ? BTW Did the Martini bar open yet ?

To: IQBAL LATIF who wrote (30501)	1/20/2000 7:57:00 PM
From: tracor	Respond to of 50167

Ike, No new news of late on SOS, however, even though this article dates back to Nov. it may be new to some on the thread. idg.net RZ

To: IQBAL LATIF who wrote (30501)	1/21/2000 9:22:00 AM
From: Lee	Respond to of 50167

Good Morning Ike,..Re:.making some relationships and working on this bond trade You might be interested in Stephen Roach's piece this morning on the Global Economy. He brings up some interesting points about safety valves which, when we think about it historically, might be pertinent. <g> Remember when currencies could swing wildly in response to some global event? Those swings might have been the mechanism to relieve stress elsewhere. Something to think about anyway. <g> Best, Lee msdw.com Global: Global Venting Stephen Roach (New York) Notwithstanding a very human aversion to volatility, financial market fluctuations can serve a very useful purpose. By continually repricing risk and reward, markets still offer the best mechanism to allocate scarce capital to its most productive end. I have long held the view that market adjustments often mirror actual or perceived shifts in the underlying macro backdrop. In that important respect, financial markets play a key role in venting the tensions and imbalances that often arise in the real economy -- especially one that is drawing ample support from the liquidity injections of monetary accommodation. The trouble comes when that venting mechanism gets short-circuited for one reason or another. It's like putting pressure on one side of a water balloon -- something usually gives. That's the image that haunts me as I contemplate the world financial market outlook for 2000. Licking their wounds in the aftermath of the worst global currency crisis of the post Bretton Woods era, G-3 policy makers have implemented a "quiet target zone" arrangement for the dollar, yen, and the euro. This reflects a relatively new view that large movements in the world's major currencies are a bad thing -- irrespective of relative divergences in underlying macro conditions. This implicit understanding lies at the heart of the haggling that is now going on in the days leading up to the G-7 meeting in Tokyo. Japan apparently wants a "weak-yen" statement, whereas the US and Europe are resisting. But the battle is being waged over 10% fluctuations around the 100 yen/dollar threshold -- hardly allowing currency markets enough slack to play their normal equilibrating role between a still weak Japanese economy and emerging strength elsewhere in the world. A similar point of view has been adopted in confining fluctuations in the euro to the 1.0 to 1.1 range against the dollar. With this important element of the global venting mechanism shut down, the risk is that something else may have to give. Just like the water balloon. That "something else" appears to be global bond markets. Absent the venting in foreign exchange markets, shifts in long-term interest rates may now be taking up the slack. And the longer the authorities cling to some form of currency targeting, the more persistent will be the pressures on global bond markets. Such cross-market spillovers have potentially significant implications for the global economy. In the end, currency adjustments have essentially a zero-sum impact on the global economy. Currency shifts do have important impacts on the mix of global output and on rectifying current-account imbalances across the world. But being relative prices, when one goes up, the other(s) go down --leaving the level of global output essentially unchanged; the one caveat to this assertion is currency adjustments that could fall most heavily on countries/ regions with large weights in the global GDP, skewing the impact on world output and inflation away from neutrality. Bond market adjustments, by contrast, do not have a neutral impact on the global economy. When real yields go up, output levels ultimately decline -- and vice versa. Moreover, rising nominal yields can put additional pressures on overvalued equity markets, triggering reductions in personal consumption through long-lagged wealth effects. Bond market venting also has an impact on a much larger portion of the global economy than does currency venting. Indeed, the interest-rate sensitivity of the developed world is largely concentrated in the fixed investment sector -- a little more than 20% of industrial world GDP. By contrast, the currency-sensitivity of the developed world bears down on foreign trade, which typically accounts for about 12% of industrial world GDP. By forcing the venting mechanism to be concentrated in global bond markets, a greater slice of the global economy is being exposed to financial market risk. Of course, there is always the possibility that the authorities will also attempt to limit adjustments in bond markets. Given the potential equity market risk that a spike in bond yields might trigger, such a temptation is understandable. It's the ultimate moral hazard play. Fearful of a potentially destabilizing crash in both bonds and stocks -- along with attendant risks of a wealth-induced recession -- central banks could roll the new-paradigm dice and flood the system with even more liquidity. Absent any venting in currency, bond, and stock markets, there might then be only one escape valve left -- an old-fashioned resurgence of inflation. By constraining financial market volatility, excess liquidity may have little choice other than to spill over into the real economy. And then the water balloon might even pop.

To: IQBAL LATIF who wrote (30501)	1/27/2000 9:26:00 AM
From: N	Respond to of 50167

Ike, here's a nifty little info source: the commitment of traders reports: speculators short on bonds, hedgers slightly long week 1/11 cftc.gov U.S. TREASURY BONDS - CHICAGO BOARD OF TRADE REPORTABLE POSITIONS AS OF 01/11/00 \| -------------------------------------------------------------\| NONREPORTABLE NON-COMMERCIAL \| COMMERCIAL \| TOTAL \| POSITIONS --------------------------\|----------------\|-----------------\|---------------- LONG \| SHORT \|SPREADING\| LONG \| SHORT \| LONG \| SHORT \| LONG \| SHORT ------------------------------------------------------------------------------ (CONTRACTS OF $100,000 FACE VALUE) OPEN INTEREST: 622,471 COMMITMENTS 54,596 104,394 23,004 448,829 387,679 526,429 515,077 96,042 107,394 CHANGES FROM 01/04/00 (CHANGE IN OPEN INTEREST: 55,317) 10,415 22,723 10,764 24,516 -1,561 45,695 31,926 9,622 23,391 PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS 8.8 16.8 3.7 72.1 62.3 84.6 82.7 15.4 17.3 NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 318) 39 71 21 100 117 155 195