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Strategies & Market Trends : Piffer OT - And Other Assorted Nuts -- Ignore unavailable to you. Want to Upgrade?

To: Diana who wrote (62824)	12/29/2000 11:11:32 AM
From: Junkyardawg	Read Replies (2) \| Respond to of 63513

Have you read Maestro? If not, I think it is one hell of a good read. I have lots of opinions on Greenspan and most of you know how I feel. I think we have an inherent problem with the system. The FOMC simply has to much power and Greenspan has way to much power. He has gotten to the point that he is no longer held accountable for his actions. I call it the "god complex". For this reason I feel strongly that his position should be limited to two terms at most. No person in my humble opinion, in a democratic society should have the power that he does and not be held accountable. The system is a system that has been around for too long and the system needs changing. dawg

To: Diana who wrote (62824)	12/29/2000 11:20:28 AM
From: Junkyardawg	Respond to of 63513

I recommend reading this article. In my opinion the FED is going to have to move soon. Although highly unlikely the FED could ease 3/4 on the next move. Again highly unlikely but I do think a 1/2 is almost a sure thing. quote.bloomberg.com California's Utility Rate Crisis Could Become Fed's Headache By Noam Neusner Washington, Dec. 27 (Bloomberg) -- It's pretty clear why California Governor Gray Davis wanted to meet yesterday with Federal Reserve Chairman Alan Greenspan to discuss the state's utility rate crisis. Words of advice from the Fed chairman may serve as a useful prop in case Davis needs to defend lifting limits on utility prices, analysts said. This economic castor oil may be required to prevent California's two largest utilities, PG&E Corp. and Edison International, from seeking bankruptcy court protection. At the same time, Greenspan may have needed the two-hour meeting as much as Davis, some economists say. The Fed chairman may be concerned that a default by the two utilities could undermine U.S. credit markets, which would imperil an already cooling U.S. economy, they say. ``This is a credit event,'' said Steven Ricchiuto, chief economist at ABN Amro Inc. in New York. ``It's not just simply an energy development.'' A default by the two utilities could make previous credit crises negotiated by Greenspan and Treasury Secretary Lawrence Summers -- who also attended yesterday's meeting -- look like a walk in the park. That's because most major credit problems of the last decade have been overseas, and this one is at home -- and its effect could be felt throughout the U.S. When hedge fund Long-Term Capital Management was on the verge of going under, it threatened its broker-dealer investors. By comparison, the two California utilities count among their creditors money funds used by millions of ordinary investors. Money Market Effects Among the biggest investors in the utilities' billions of dollars in commercial paper are money market mutual funds, which generally hold their investments until maturity. If the utilities default, that could force such mutual funds to show a loss -- an unusual event considering their virtually risk-free portfolio. ``Any significant damage to one of these companies would reverberate across the capital markets,'' said Peter Crane, a vice president at iMoneyNet in Westborough, Massachusetts, which publishes the Money Fund Report. ``What you don't want is investors panicking and people asking for their money back.'' For Greenspan and Summers, two of the three policy-makers once dubbed the ``Committee to Save the World'' for their efforts to steer the U.S. economy through financial crises in 1997 and 1998, the California utility rate crisis will require some deft management, economists say. The Fed, in particular, can't be perceived as bailing out the utilities to save debt holders -- that would only encourage investors to believe that risky investments aren't so risky, economists said. The Fed was criticized in 1998 for engineering a bailout of Long-Term Capital, for precisely that reason. Governor Davis, who also met with President Bill Clinton at the White House today, has said he came for support and ideas, not a bailout. Banks Clamping Down His particular interest -- buying time for the utilities to work out their debts as the state's energy regulators figure a way to stem losses at the companies -- blends nicely with a recent concern of Greenspan's that credit markets may have gotten too stingy. Lending to junk-rated companies in the U.S. is on track to fall for the first time in seven years as banks clamp down on credit to riskier borrowers. That has, in turn, kept many companies from raising capital to expand, just at a time when the U.S. economy's record expansion looks threatened by a possible recession. Greenspan has warned commercial bankers not to tighten their lending standards too brusquely, and earlier this month urged them not to let the ``pendulum swing too far the other way.'' Greenspan's worry may be that a default of the utilities' debt will cast a pall over the market for lower-rated commercial paper sold by companies on watch for possible downgrade, such as AT&T Corp. Companies use commercial paper to raise short-term money at favorable levels to address day-to-day cash needs and provide financing while they await long-term debt financing. Deregulation Watch Davis came out of yesterday's meeting with Greenspan and Summers declaring that deregulation of wholesale prices and power generation has failed, and cautioned that California's example would keep other states from following suit. Greenspan, an ardent free marketer, may look at the current situation as a test of deregulation. Meanwhile, Greenspan may be concerned that an energy price- induced slowdown in California, which comprises about 11 percent of total U.S. output, would drag the rest of the country into a recession. ``Davis is in a tight spot: If rates go up too much, it could lead to a recession, and if they don't go up enough it could lead to bankruptcy,'' said Steve Greenwald, energy practice partner at Davis, Wright & Tremaine in San Francisco.