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To: anthonydp who wrote (67828)	4/18/2001 2:06:01 PM
From: Michael Collings	Respond to of 116972

I'd like to respond on this interest rate cut. Russ, you are correct that the bond market is responding badly. Here's what I see. I mentioned this a few weeks ago and the evidence is now coming in. The non-performing loans in the banking system is ticking upwards, and the banks must increase their loan loss reserves dramatically in the coming months. Again, non-performing loans are loans that are already 90 days in arrears. Last fall these numbers began ticking upwards for the larger banks. It now appears that it is trickling down to the regional banks. In the coming months, we will see banks allocating much of their earnings to loan loss reserves. The Fed, who's primary function is to maintain a sound banking system, must again allow for a steep yield curve, i.e., low short rates and high long rates, which will allow the banks to make extraordinary spreads to cover their losses. We saw this the last time the banking system was in trouble back in the early 1990's. These drops in rates now will have very little effect on loan rates going forward, however, there will be a large impact on c.d. rates... nothing but down. This is why the Fed is acting now. This is now our indication that the credit bubble is beginning to implode. I wouldn't be looking to invest in stocks or long term bonds. Got gold?