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Strategies & Market Trends : Drillbits & Bottlerockets -- Ignore unavailable to you. Want to Upgrade?

To: The Phoenix who wrote (2293)	1/31/2001 10:27:58 AM
From: Oral Roberts	Read Replies (1) \| Respond to of 15481

--__--__--__--NAZWAG - 013101--__--__--__-- 2915 JXM 2857 Rich1 2965 OG 50 basis points 2880 Jeff

To: The Phoenix who wrote (2293)	1/31/2001 11:24:49 AM
From: Original Mad Dog	Read Replies (2) \| Respond to of 15481

I am starting to come around to the point of view that it will be 50 bp instead of the 25 I had been expecting..... But....if it is 50bp, I expect some statement or guidance that we have to wait to see if the rate cuts already made are enough to help....before we see further cuts. And that hint, however it is made, I believe will cause the market to sell off. Maybe not harshly, but some. Longer term, I believe there is room to cut rates another 150bp from here......for a couple of reasons. First, inflation has not really been that bad even during the boom.....and in a recession we may see deflation or price stagnation pretty quickly. We are already seeing the pockets of aggressive price cutting that always accompany high inventory levels....and the New Economy can cause those reactive moves to occur more quickly. $5000 rebates on Chrysler minivans and hundreds of dollars off Dell computers are only the beginning. With zero inflation you can move your nominal interest rates down quite a bit. The other reason there is room to move the rates down is the budget surplus. When you are retiring debt you don't need to attract investors to your remaining debt instruments quite so strongly. As long as the surplus remains large, it will give us lower rates.....which in turn will cause the surplus to grow larger as debt service expenditures decrease.