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To: Jim Willie CB who wrote (4439)	5/18/2003 10:57:41 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

G7 Shows Scant Public Concern for Dollar >>Snow's description of a "strong" dollar on Saturday also revealed that a high exchange rate with the world's other major currencies was not necessarily part of his view. Asked what he meant by "strong" in Washington's long-running policy, Snow said: "What you want to be strong is (that) you want people to have confidence in your currency, you want them to see a currency as a good medium of exchange." "You want the currency to be a good store of value. You want it to be something people are willing to hold. You want it to be hard to counterfeit...those are the qualities," he added. Pressed to say whether he considered the value of the dollar to be among the qualities that he used to define a strong currency, Snow said, "That reflects the fundamentals of the demand and supply for currencies." << Reuters Saturday, May 17, 2003; 4:51 PM By Mike Dolan DEAUVILLE, France (Reuters) - The world's finance chiefs on Saturday omitted referring to volatile world currencies in a post-meeting public statement, a move that may be seen by markets as endorsing the recent U.S. dollar slide. Ministers from the Group of Seven (G7) richest nations, famous for its dramatic currency market interventions in the 1980s, told reporters after the meeting they agreed to avoid explicit reference to foreign exchange markets due to the absence of their central bankers. Meetings without the bankers avoid written references to currencies, they said. They also said currencies were discussed as part of a general economic assessment and there was agreement to continue to monitor markets and cooperate if action was necessary -- a line that is often included in their communiques. But the absence of this standard reference to currencies is marked at a time when the dollar has fallen steeply to near four-year lows against the euro and two-year lows against Japan's yen and is likely to fuel the view the G7 is relaxed about these trends. Last year's pre-summit meeting of G7 finance ministers in Halifax, Canada also omitted any reference to currencies when central bankers where absent, but the dollar drop has accelerated sharply since then and has caused concerns in Japan and Europe. Comments on Saturday from U.S. Treasury Secretary John Snow stoked the view that governments are comfortable with current foreign exchange rates -- showing that the United States at least was not strongly opposed to the dollar's fall. "There was a general discussion of the backdrop against which the world economy is functioning, and part of that backdrop is the really fairly modest realignment of currencies that has occurred," Snow told reporters. Snow, who added pressure the dollar's decline this week by saying a weaker dollar was good for U.S. exports, has frequently qualified the U.S. Treasury's long-standing "strong dollar" policy from Clinton administration in the 1990's boom years. Snow's description of a "strong" dollar on Saturday also revealed that a high exchange rate with the world's other major currencies was not necessarily part of his view. Asked what he meant by "strong" in Washington's long-running policy, Snow said: "What you want to be strong is (that) you want people to have confidence in your currency, you want them to see a currency as a good medium of exchange." "You want the currency to be a good store of value. You want it to be something people are willing to hold. You want it to be hard to counterfeit...those are the qualities," he added. Pressed to say whether he considered the value of the dollar to be among the qualities that he used to define a strong currency, Snow said, "That reflects the fundamentals of the demand and supply for currencies." washingtonpost.com

To: Jim Willie CB who wrote (4439)	5/18/2003 11:02:17 AM
From: 4figureau	Read Replies (2) \| Respond to of 5423

Investor Rush to Junk Bonds May Sour >>Billionaire investor Warren Buffett (news - web sites) hinted at his annual shareholder meeting earlier this month that he was no longer buying junk bonds, after loading up last year. In a report this week, Merrill Lynch strategist Richard Bernstein noted his firm's analyst team "believes that the high-yield bond market is now the second most overvalued" in 18 years.<< By Martha Graybow NEW YORK (Reuters) - U.S. investors, in a search for higher yields, have rushed into hot-performing junk-bond funds, but some financial pros worry they could be coming to the party too late. Junk-bond funds have taken in record amounts of cash this year from investors searching for better returns than those found in stocks or Treasuries. Fund firms such as the Dreyfus Corp. recently have rolled out new funds of this type, but financial planners say high-yield corporate debt is still an area that investors should approach with caution. "I would strongly conjecture that most of the folks buying these things now haven't the foggiest idea of what they are buying," said Joel Ticknor, a certified financial planner in Reston, Virginia. "They are sold as high-yield funds, which is a seductive term. Everybody likes high yield." Junk-bond funds invest in debt rated below investment grade and carry high yields to compensate for default risk. They have increasingly drawn in investors this year as default rates have come down, raising hopes that credit quality is improving. These funds, with combined assets of more than $100 billion, are up more than 11 percent this year through May 8, according to fund tracker Lipper, a unit of Reuters Group Plc. Investors deposited nearly $18 billion in junk-bond funds year to date through May 7, beating the record $17.87 billion inflow for all of 1997, according to research firm AMG Data Services. While some financial planners urge caution, portfolio managers see the opportunity for further gains in junk bonds. "The rally that's gone on in the most distressed credits, which has driven the great total return in the latest nine months, has almost run its course," said Diane Keefe, manager of the Pax World High-Yield Fund (Nasdaq:PAXHX - news). "But the mainstream high-yield and higher quality issues that I traffic in can still have good total return prospects going forward." But some market observers are wary. Billionaire investor Warren Buffett (news - web sites) hinted at his annual shareholder meeting earlier this month that he was no longer buying junk bonds, after loading up last year. In a report this week, Merrill Lynch strategist Richard Bernstein noted his firm's analyst team "believes that the high-yield bond market is now the second most overvalued" in 18 years. Tampa, Florida financial planner Sameer Shah said he encouraged some clients who were leery of stocks last year to reallocate some money to junk-bond funds, but he is no longer giving out that advice. "We stopped a couple weeks ago, and are now moving stuff out of the junk-bond area," he said. Still, planners say devoting about 5 percent of an overall portfolio to junk-bond funds can be a good way to diversify, especially when investors already have an array of bond funds. They note that these funds often vary widely in risk, which makes it important for investors to choose a fund carefully. "The junk bonds to me, are my final, 'let's round out the portfolio' if there's room for somebody who understands the risk," said Diane MacPhee, a planner in Glen Rock, New Jersey. "It's a viable investment if someone understands it." Fred Hoff, manager of the Fidelity High Income fund (Nasdaq:SPHIX - news), said history shows that over the medium to long term these investments fall somewhere in the risk spectrum between high-grade corporate bonds and stocks. "If anyone feels comfortable owning some equities, they should feel comfortable owning some high yield," he said. "I own it, my father owns it and I own some of it in my children's accounts, so I really think it can suit all kinds of different investors." story.news.yahoo.com

To: Jim Willie CB who wrote (4439)	5/18/2003 12:49:32 PM
From: 4figureau	Respond to of 5423

U.S. Dollar Poised to Drop for a Seventh Week Against the Euro Tokyo, May 18 (Bloomberg) -- The dollar is poised to fall against the euro for a seventh week as investors seek higher interest rates on euro-denominated assets and after U.S. Treasury Secretary John Snow called the dollar's slide ``fairly modest.'' Two-thirds of the 30 traders, analysts and investors surveyed by Bloomberg News on Friday recommended buying or holding euros against the dollar. The U.S. currency will likely extend a 9 percent drop against the 12-nation euro this year as slowing capital inflows from overseas make it more difficult for the U.S. to finance its current account deficit, economists said. ``What investors get for their money in the U.S. is less than they get elsewhere,'' said Paul Samuelson, a Nobel laureate and professor emeritus of economics at the Massachusetts Institute of Technology. Interest rates ``will remain low, and the U.S. has a current account deficit to finance while other countries are still digesting a surplus. It doesn't take much to figure out the dollar will continue to fall.'' The U.S. currency lost 0.9 percent against the euro last week and sank to a four-year-low of $1.1624 on Monday. It fell 1.2 percent against the yen and reached 115.34 on May 15, the lowest in more than two years. Snow's comments to reporters after a weekend meeting in France of finance ministers from the Group of Seven major industrial nations and Russia signaled the U.S. is comfortable with the dollar extending its slide, investors said. ``There was a good discussion of the backdrop against which the economy is functioning, and part of that is the fairly modest realignment of currencies that has occurred,'' Snow said. Market Rates The comments came less than a week after Snow said exchange rates are ``best set'' by the market, indicating a reluctance by U.S. officials to curb the currency's 21 percent slide against the euro over the past 12 months. ``His comments in no way put a floor under the pattern of decline in the last 12 months,'' said Andrew Weiss, a currency strategist at AIG Trading Group in Greenwich, Connecticut, a unit of American International Group Inc., the world's biggest insurer. ``They just reinforce people's bearish instincts about the dollar. We expect the dollar's decline to continue.'' At its May 6 meeting, the Federal Reserve suggested it may lower rates to combat a potential ``fall in inflation.'' The Fed's 1.25 percent benchmark rate target is half the European Central Bank's key rate. Both banks left rates unchanged two weeks ago. ``The Fed threw cold water on expectations for an increase in rates by the end of the year at a time when the ECB is being stubbornly slow in acting,'' said Allan Meltzer, a professor of political economy at Carnegie Mellon University and an honorary adviser to the Bank of Japan since 1986. ``There are signs investment is going elsewhere as people reach for higher yields.'' Lower Yields The U.S. 10-year Treasury note yield sank more than 20 basis points last week and reached 3.44 percent in intraday trading May 16, the lowest for a government security with 10 years to maturity since 1958. In comparison, 10-year German bonds yield 3.82 percent, while 10-year Italian bonds yield 3.96 percent. Fed Chairman Alan Greenspan is slated to testify Wednesday on the economy to the Joint Economic Committee of Congress. U.S. interest rates below those in Europe make it harder for the U.S. to attract the $1.5 billion needed daily to offset the deficit in its current account and sustain the dollar's value. The deficit widened to a record $136.9 billion in the fourth quarter. Europe and Japan have surpluses in their current accounts, a broad measure of trade that includes interest on investments. Investors took a net $223 million from U.S. stocks last week, the fifth net outflow in six weeks, according to UBS Warburg. The currency's slide has helped lift profit at many U.S. companies by making their goods cheaper overseas. Eastman Kodak Co., Johnson & Johnson and 3M Co. reported increased sales in the first quarter because of the weakening dollar. `Subtle Message' Snow ``has done a very good job of giving the markets the subtle message that the U.S. doesn't mind the dollar's fall'' said Michael Derks, chief global strategist at Commonwealth Bank of Australia, that country's second-largest lender. ``It's all hands to the deck in the U.S. to help the economy.'' Derks on Friday cut his forecast for the dollar to $1.23 per euro by the end of the year, citing the widening current account deficit in the U.S. and sluggish growth. The U.S. economy grew at a 1.6 percent annual pace in the first quarter and is expected to expand 2.3 percent this year, according to the May Blue Chip Economic Indicators survey, down from a January forecast of 2.8 percent. One-third of the investors and analysts surveyed by Bloomberg News recommended buying the Japanese yen against the dollar; almost half recommend buying the Australian dollar. ``Officials in Europe and the U.S. expressed little if any concern about'' the weaker dollar before the G-7 meeting, said Marc Chandler, chief currency strategist at HSBC Securities USA Inc. Inaction will translate into ``a green light to sell dollars,'' weakening the dollar to $1.17 per euro and 115.10 yen this week, he said. quote.bloomberg.com