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

To: Haim R. Branisteanu who wrote (49070)	5/2/2000 9:00:00 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 99985

Why the cartel-busters leave Wall Street alone by ANTHONY HILTON, City Editor The US Justice Department and its allies seem pretty determined to break up Microsoft. Having read in Michael Lewis' book, The New New Thing, how Microsoft allegedly behaved towards Netscape, one can understand why the company has got to be so disliked, despite its obvious success. What is intriguing, however, is that Microsoft has become a target when others who seem to have been much more overt in their use of market power and maintained their position for much longer seem not to have attracted any interest at all from the Justice Department. To British eyes there is a much more worthwhile target for the US authorities. The most long-lasting and most obvious intriguing pricing arrangement in the world is the one that the American investment banks in New York maintain in their domestic market for the selling of new issues of shares, or IPOs - initial public offerings. In spite of the fact that Morgan Stanley, Goldman Sachs, and Merrill Lynch are supposed to be in ferocious competition, it still costs a client company about 5% of the capital raised to get new money. It does not matter which investment bank the client goes to, a big one or one of the not-quite-so-bulging in the bracket. The fee, coincidentally, is always the same. Nor is it a rock-bottom price - quite the opposite. It is a rate far in excess of anything charged in the City even back in its clubby days when some thought it had cartel tendencies. The houses concerned insist that there are no formal arrangements between them, and absolutely nothing illegal. This, however, makes it seem all the more odd that the price of capital-raising has never dropped to the levels to be found elsewhere in the world. Also slightly undermining the big firms' protestations are the people who have worked for these houses who tell tales about the pressure that comes from rival houses if one strays outside the areas where it is expected to operate or the prices it has traditionally charged. It is worth noting too that because the big firms co-operate in many joint underwritings, they do have the sanction of cutting each other out of deals if they are displeased. One could argue that mystifying though it might be, what happens in the United States domestic market should be of no concern to us. Unfortunately, we cannot be that complacent, for it is the huge profitability of the domestic US market that has allowed American investment banks to finance their expansion in the rest of the world, most notably Europe, and impose their vision of transaction-driven investment banker capitalism on the rest of the world. That huge profitability enabled them to run their overseas offices at a loss for years and to hire the best talent at salaries and bonus levels European firms find impossible to match. It is in many ways the equivalent of dumping, something the US authorities are again very much opposed to when it is done to them. The one doing the dumping uses the profits generated in the home market to invade foreign markets and then employs pricing strategies that wipe out the local competition. But if there is as much to be concerned about as non-American observers suggest, why has no American government moved against Wall Street? The answer could be that, unlike Bill Gates' Microsoft, Wall Street firms have always been assiduous in supplying the President of the day with senior members of his administration. President Clinton's recently-retired Treasury Secretary Robert Rubin came from Goldman Sachs and one can go back in every administration for 20 years to the appointment of the then Merrill Lynch boss Donald Regan to President Ronald Reagan's government in 1980. Each President relies on Wall Street money to get to office and relies on Wall Street brains to keep him there. In such a situation one might understand why a junior in the Justice Department who had the bright idea of launching an action against an alleged Wall Street cartel might find it short of support from his bosses. Promoting such a case is unlikely to be a career-enhancing move. ¸ Associated Newspapers Ltd., 02 May 2000 Terms and Conditions This Is London

To: Haim R. Branisteanu who wrote (49070)	5/2/2000 9:19:00 PM
From: bobby beara	Read Replies (2) \| Respond to of 99985

Haim, i have been pointing out the H&S in the crb for months. It looks to me that the disinflation/deflationery cycle bottomed in 1998, with a washout depression era lows in many commodities. The fed has successfully avoided the deflationery problem by pumping up the money supply everytime the market goes over the edge (1987, 1998) and now we will deal with the inflationery cycle. The rally in the bonds from 1/14 looks like a countertrend rally. if the bonds break to new lows, we could be breaking the last two decades of goldilocks, low inflation, low rates scenario, this is why the market is so volitile, we are in a period of change and instability and stretched above historic means, both in charts and fundamentsls -imho. from a fundamental standpoint this is easy to understand, everybody and their brother is driving a gas guzzling SUV bought under goldilocks conditions, just the same dynamic that we had in the 70's, when everybody starting trading in the gas guzzlers for fuel efficient vehicles (late 70's). yes this is a new era in information technology, but information technology is a part of the economy, not the whole economy as advertised -g- b