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To: GST who wrote (108911)	9/23/2000 9:39:40 PM
From: H James Morris	Respond to of 164685

Gst, >September 23, 2000 U.S. multinational stocks were getting gored. Al Gore's buddies came to the rescue -- at least yesterday. First, the Group of Seven nations, including the United States, chipped in to buy the euro to prop up this extremely undervalued currency. The weak euro was helping U.S. tourists going to Europe, but hurting U.S. multinational companies' earnings and stock prices, as well as fueling European inflation and threatening to whack European economic growth. However, historically, currency interventions don't have a lasting effect. Then President Clinton directed the release of oil from the government's emergency reserve. Even before the action, oil prices had been dropping in anticipation of such a move. The weak euro, high oil prices and disappointing earnings have been belting stocks. Now, two of the bugaboos have been swatted. Gore should be smiling. Stocks should recover some ground -- indeed, they turned around impressively yesterday after a dismal start. However, down the road, well after the U.S. election, don't be surprised if you see a 75-cent euro. This week it got as low as 84.38 cents before going briefly over 90 cents, then giving back some of the gains, after the intervention. But don't think Europe -- or the rest of the world -- is collapsing. It will probably be a matter of the currency market, like the U.S. stock market, being swept along by momentum traders -- the gamblers who don't give a hoot for fundamentals, but simply sell what is dropping and buy what is rising. To a large degree, it's the momentum gunslingers that have pushed the euro down from its introduction at $1.18 in January 1999. European fundamentals simply have not justified a plunge to below 90 cents. In recent weeks, Europe has had a public perception problem; its truck drivers tied up countries protesting the rise in oil prices, and when France caved in to them, analysts were seeing visions of 1970s Eurosclerosis. But these visions were and are misguided. "In euroland, industrial and consumer confidence are strong despite the expectation of higher short-term interest rates" to prop up the euro, says Nick J. Spencer of New York-based Bernstein Research. "Continental countries' business cycle has lagged behind that of English-speaking lands by several years in the last decade, so euroland economies are still accelerating," says Springfield, N.J.-based economist A. Gary Shilling. However, things are slowing in the United States, says Shilling. "As American import cutbacks spread to the rest of the Americas and to Asia, almost 60 percent of euroland exports will be hurt," he says. Spencer and Shilling expect the European Central Bank to raise interest rates. Intervention alone won't do the job. Even though the European economy is doing well -- partly because the weak euro is stimulating exports -- it is not doing anywhere near as well as the U.S. economy. And Europe is more vulnerable to high oil prices than the United States. Ergo, expect economic weakness in euroland. This weekend, the G-7 finance ministers and central bankers huddle in Prague. The euro and oil prices are certain to be matters of heated discussion. In the United States, high oil prices pose a real economic risk, says Treasury Secretary Lawrence Summers. Before yesterday's coordinated intervention, a vice president of the European Central Bank said the euro was "dangerously undervalued" and could see a "brutal" reversal. Meanwhile, the consensus of a Reuters poll of economists was that the euro will be at 89 cents a month from now. Oil's price a month from now? You have to bet there will be pressure to get it down before the U.S. election. But don't count on it staying there. Remember that two Texas oilmen are running. They may lose, but other forces, like OPEC, have a say in the matter.