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To: nanu swamy who wrote (4530)	12/16/1997 11:59:00 AM
From: Mo Chips	Read Replies (1) \| Respond to of 19080

Yes, the Fed can affect the supply of cash, but that does not guarantee that the funds will go into the market driving up stock prices. MMs and investors go through the risk/reward analysis and then make the decision to buy or sell. The risk free rate of return is a variable in this equation, but it is not the only variable. I agree that there is some effect from the actions you describe, but as you put it..." I think that the DOW is right now under computer control and is being held "artificially high" to keep consumer confidence up. If the Fed stops pumping money into the market, the DOW would collapse like a rock and so would all big cap stocks..." I completely disagree with this hypothesis. Besides, the Feds Funds rate hasn't changed, has it??!! I agree with others, don't put too much faith into this book... Mo

To: nanu swamy who wrote (4530)	12/16/1997 6:51:00 PM
From: Larry Myers	Read Replies (1) \| Respond to of 19080

>>>The price of a stock is directly related to the supply/demand situation. If there is more money pumped into the financial markets i.e the Fed pumps money into big financial institutions - there is more money/fluidity in the system to trade the "fixed" quantity of stock. So the stock price has a tendancy to go up... (but may not due to other conditions) The Fed also has the power to pull money away from financial institutions and produce an opposite effect. <<< I do not pretend to be an economist and maybe you are but if what you say is true how come in 30+ years of investing I have never read a stock market report saying the markets' gain or loss today was due to Fed intervention by either adding or diminishing liquidity? If this was ever true I don't think that it is today with the market capitalization as high as it is. We trade 300-500 million shares a day commonly now and just 5 years ago it was around 100-200 million. No, I dare say there are many other factors moving the markets today and Fed intervention is not a significant one. Our markets are truly global today so this dilutes the Fed's effect even more. Just an untrained opinion on my part. Best to all, LJM