To: Henry Volquardsen who wrote (2653 ) 12/23/2000 3:15:12 PM From: Zeev Hed Read Replies (2) | Respond to Henry, quite interesting, we agree at least on one thing, the king Pin" of next year's market, is once more going to be Asia (and possibly, and a lesser extent, South America). I see a resumption of the Asian Malaise as on of the market themes this year (I have been "warning" about the resurgence of the Asian malaise as one cause of a continuation of the bear market into 2001 for some time here on SI). I am sure AG sees these numbers as well (the Nikkei, the Indonesian currency falling apart, major defaults in Korea, the whole "domino"). Another area which you did not address, is the trade deficit we are accumulating. If AG relax monetary policy too soon, these are going to balloon past the $40 Billion monthly, I am sure AG is keeping an eye on this situation as well, and he must be in a tight spot, getting the economy back above 3.5% growth soon, will surely blow the balance of payments, waitng for the economy to go into negative growth is not "acceptable", thus I think he will chose a mid point, namely, getting the economy to grow in the .8% to 1.8% or so for two quarters or more. That will slow down the import machine. Of course, if the feds see in their tea leaves an economy going into recession, they may act differently, but I doubt they will panic before they see unemployment inching back toward the 4.5%. I always thought that AG wanted to keep interest rates a little higher than what is "called" for by the actual rate of inflation, and the reason, I thought, was to leave him enough room to lower drastically in case a financial crisis here or around the world were to occur. If interest rates are already "low", lowering these further do not have the desired impact (look at Japan going to negative rates in vain).
