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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Joan Osland Graffius who wrote (3046)	10/25/1997 6:25:00 PM
From: Defrocked	Read Replies (2) \| Respond to of 10921

Joan.some ramblings on the global economy.FWIW. I've been theorizing about today's markets with intertwined financial systems. I remember when "the globalization of world markets" was just a recently-coined phrase and trillion dollar swap markets didn't exist. In the early 80's one couldn't even arbitrage Japan or England due to currency restrictions. It's a different game now and probably a better one when players get used to it. My theory about market reactions in today's environment concerns the rapid movement of funds and the substantial liquidity that currently exists. Theoretically increases in liquidity should reduce bid/ask spreads. But in today's markets that increase in efficiency comes with the risk of quick exit in troubled times. Additional investment in emerging markets is great for the locals unless their government starts ill-advised spending programs. Today's markets quickly discipline wayward government spending and policies since there exist so many easily accessed alternatives. Once corrective measures are firmly established capital may return as easily. My hypothesis is that these positive and negative aspects aspects of liquidity and rapid capital deployment may balance out over time. In this environment one would expect large and sudden capital movements to dampen in the future as governments become disciplined by the negatives and instead pursue positive economic programs. (They will love and hate capitalism all the way to improved real incomes.) This is somewhat the situation in today's currency market. Large pools of speculative capital are searching for excess return but in the process make investing more efficient. Arbitrageurs will also pounce on perceived missteps by any government as we have seen Thailand, Malaysia, Hong Kong and soon to be Brazil. These dislocations are sudden and severe but do not have to spill over into other economies if the culpable governments react quickly and positively. During this learning process by governments and investors alike, large downswings can easily be followed or even muted by subsequent upswings. Thus I don't look for a recession or depression scenario resulting from current Far East activity to impact the US at this time. However, I am unsure of investor and Mutual Fund response given the large profits still (as of Friday) on the table. A slowdown in consumer spending could be likely. This would be positive for bonds and eventually again for stocks. I just reread this post and, well, its only a theory<g>. Be careful with your money and good luck.