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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Chip McVickar who wrote (4492)	8/29/2001 9:38:35 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Chip, you're not trying to tell us it's business as usual in the Arena of InterNational Banking and Finance are you -vbg- but seriously, this sounds interesting Allan Meltzer, professor of economics at Carnegie Mellon University and president of the university's Gailliot Center for Public Policy, and Adam Lerrick, the Center's director, have a proposal. They think there's an alternative to total bailout or total market chaos: default without disruption. Setting a Floor Here's how it would work. The IMF ``would stand ready to buy any and all debt of a crisis government to the private sector at a support price significantly below its expected restructured value,'' Lerrick and Meltzer wrote in a May report. The floor would prevent a panic and collapse in the market, the authors claim. The element of uncertainty -- over whether the country would default -- would be removed. The financial system would be insulated from any contagion effects. The country's debt burden would be reduced to sustainable levels. Private lenders would bear the loss, which would have ``predictable limits.'' With the IMF backstop in place, the borrower ceases all debt payments. The debt is restructured within a short time frame (three to six months in the Meltzer/Lerrick plan). In short, ``the official sector would step back from its current role of guarantor of speculative capital to emerging economies and become a true lender of last resort that responds to market failure yet preserves market discipline,'' Lerrick and Meltzer wrote. Intersting suggestion........ I think the real key point that was mentioned in the article is that the Players involved don't want to take a chance of unwieldy situations getting out of control and threatening the Confidence in the System John

To: Chip McVickar who wrote (4492)	8/29/2001 10:18:12 PM
From: John Pitera	Respond to of 33421

The McClellan Market Report P.O. Box 39779, Lakewood, Wash. 98439 www.mcoscillator.com AUGUST 10 ~ We see numerous signs pointing to an important stock market top due August 27. For one thing, that is when stocks typically top out in the first year of a presidential term. Stocks also tend to make mid-October bottoms in first years, and we see plenty of vulnerability for a meaningful decline between that August 27 top and around October 12. Bonds should lead the way lower, making as severe a decline as we've seen in a while during August and September. This is not the time to be a brave bond bull when Uncle Sam is selling his biggest quarterly net issuance in five years. Gold has bottomed and is poised to challenge its five-year downtrend line. Gold should get an even bigger kick in September as the dollar slides. -- Tom McClellan

To: Chip McVickar who wrote (4492)	8/30/2001 7:14:12 AM
From: Louis V. Lambrecht	Read Replies (1) \| Respond to of 33421

The IMF ``would stand ready to buy any and all debt of a crisis government to the private sector at a support price significantly below its expected restructured value,'' Lerrick and Meltzer wrote in a May report. The floor would prevent a panic and collapse in the market, the authors claim. The element of uncertainty -- over whether the country would default -- would be removed. The financial system would be insulated from any contagion effects. The country's debt burden would be reduced to sustainable levels. Private lenders would bear the loss, which would have ``predictable limits.'' And all autocratic developing countries would make this as a rule to never repay their debts. Juicy market also for the financial sector, and for the defaulting countries. From the accounting point of vue, you transform a bad debtors account (possible loss) into a financial product you can sell as an asset: losses = assets Banks already sell debt products. Fancy: banks are supposed to cover the loans they grant by other guarantees (Fed fund and bonds, mortgage rights, forein currencies, gold,...financial products). They already package the loans in a loan equity --> loans = assets. IMHO,the only way to help developing countries would be to waive their debt - once and only once - in a global discussion with all participants under the condition that they implement a working financial structure. As a tax collecting system for instance. But this also would suppose a responsible government.... Lerrick and Meltzer would open the door to a debt market (as the Kyote agreement on gas emissions has opened the door to a pollution credits market): no need for the concerning countries to restructure, no remedy, and the situation stays the same in the better case.

To: Chip McVickar who wrote (4492)	8/31/2001 9:43:54 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

I have to agree with Briefing that there are still pockets of overvaluation in US Stocks that can just get you killed, if you stay in them. Valuation is the theme. -------------- Alternative Energy Stocks: With the Nasdaq trading back down to the 1700's, an observation comes to mind. The 18-month bear market hasn't been particularly explosive, but more properly fits the description of death by a thousand cuts. At this point, the idea is to stay away from those areas that might still contain another thousand cuts and we continue to believe alternative energy is an area to avoid. Two years ago it was the Internet sector -- then momentum investors shrugged off that bloodbath and moved to the optical networkers. They subsequently watched the brightest star in that group, Juniper Networks (JNPR), trade from a 52-week high of 244 down to 122 -- then down to 61 -- then down to 30 -- and finally down to today's levels in the 14's. For those of you counting, that's getting cut in half four times (plus an extra point or two). Or alternatively, that's a 94% drop from its all-time high where 100% is the most you can lose. One final way to look at it -- it would take a gain of roughly 1,650% for JNPR to recover its all-time high of 244. That amounts to about 30 years worth of 10% returns. Simply because an issue has been cut in half, this doesn't mean its valuation is attractive. More importantly, this isn't a market in which risk is being rewarded and the risk/reward dynamics on alternative energy are perhaps the least attractive in the market. Plug Power (PLUG) trades with a trailing Price/Sales ratio of 90x, Ballard Power (BLDP) carries a Price/Sales multiple of 56x and H Power's (HPOW) P/S is roughly 46x. Not exactly sterling financial fundamentals, yet to top it off none of the former businesses is posting any kind of reliable sales growth. This isn't to say we deny or dismiss the technological potential of the group. However, technological revolutions are funded on the backs of speculators -- after the Nasdaq's trailing 18-month performance, the pool of speculators is beginning to run dry. -- Michael Ashbaugh, Briefing.com