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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Philip H. Lee who wrote (16111)	1/3/1998 8:59:00 PM
From: j g cordes	Read Replies (1) \| Respond to of 50167

Deflation isn't something the later part of this century is familiar with. Our instincts and reactions have been raised on inflation. biz.yahoo.com jg

To: Philip H. Lee who wrote (16111)	1/4/1998 1:32:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

98 levels and possible problems as we move ahead- It is not deflation or inflation -Problems if any will come from--- Philip- As I expected we did finish around that level but I am now looking at second close above this level and as I had written last week my SOX level of 280 within 10 trading session has only five left- I will like to see 280 taken out as Japan takes out 15700 tomorrow - a close above 980 and decent run on FTSE CAC and DAX 140 points nearly will bring lot of possible strength in ASEA- I think bond rally is a very big plus with Japanese sitting tight on big TB's by the way we had a lot of discusssion on fate of Japanese holdings on this thread way back in June July and Japanese exactly behaved the way they should have by holding on to TB's rather TB's are their best performing assets. It is also a coomon knowledge that we don't have asset inflation of a kind which should bring fears of a deflationary cycle- we had it in pre S&L time or early 80's- asset inflation has been contained and markets have taken no prisoners on the way up any sector failing to meet expectations have been crucified far in excess of anticipated shorts falls DD's Networkers and Semis come in our mind. Now lowered bond yields have a direct bearing on profitibility and corporate bottom lines - the models our Byron White and dear Abby uses to predict S&P multiples - the multiples are a direct function of long bond yield- now imagine we had DOW at 825 with bond yielding 6.25% and heading lower- now we are sitting on a bond yield of 5.83% now this is a classic example of higher lows in bond yields but S&P mutiple is around 22- if you project 98 earnings at 51 $ and anticipate a slight move up on multiple as market prices this cheap long money add on deregulation in japan where insted of genrally raised issue o Japanese flight of money- we get new money you are looking at very positive scenerio.Deflation talks has been abound on SI and when I wrote my article on 'Dow a steal at 8000'- I can now look back and enjoy the interim period as noise- as Warren Buffet says you need to ignore some votality as exgerrated fear. I think we have clearly defined bottoms now we are looking at 850 and 1150 band - 770 the level in April 96- we saw the last move and formation of the mountain of irrational exuberance is now a distant sour support- we now have established 850 as a new level and 6950 a definite low for 98- we have tested resolve on the lows far too often - I see if INTC and MSFT or IBM disappoint in big way mid Jan 98 until mid Feb the peak of 98 first quarter earnings we may see a test of 945 930 910 or 890 with corresponding DOW levels of 7815 7700 7585 on SOX we may see in case of earning disappointments 240 220 and a test of 200, now once we are well aware of down side risk our move up is clearly defined within a non-inflationary growth environment it is perfectly legitimate to expect a move down- however we have seen earning thoroughly revised with Europe coming out of slumber which may defuse the loss of economic activity in ASEA- I expect on break of 1000 a very solid move up btw 7-8% my target is April 98 between now and than we will break 1000 but wil be unable to remain above that- we need confimations from earnings I will accordingly fine tune my strategy- As I have explained all along - just don't get fixed with ideas- we need dynamic and fluid levels and majors level break like 850 in present cycle is harbinger of major problems - once a major break is defined we can safely devise defensive strategy. In between test of supports or resistance probes we shouild keep our focus on interim levels. I will give you one example that is SOX I insisted until 280 not to shortthe index but once a major level was taken out on % age term identified the reversal level and rode down and up a cool 12% ride amongst noise- deflation or inflation are distant objective we in our every day live need to engineer trades- to put on those trades macro picture is the most important tool but the other equally important is your game plan- ninety percent of the time I see that integral factor missing- for me it is going to be a useless exercise if I am unable to post on daily basis the levels and my game plan- fluidity and dynamics and no fixation to any bearish or bullish school of thoughts are all important elements.This unique experiment I am doing with integration of levels and macro reading on daily basis so far has been satisfactory but I wish that I may able to define moves within moves more precisely. Market meltdown if any for me will come from- political escalation of violence in for example Russia- a breakdown of order- look at what Lebed is talking about. I see oil prices increase from 24$ upwards another problem for the markets. ME although quite a big out of proportion news item does not have the kind of potential to kill the markets. Korean peninsula and China economic problems can create a big ripple but again I will lok tensions with Taiwan haing a far bigger impact- economic woes in Chian can lead to political ramifications and to avoid attention we may see some escalation again hitting ASEA severely. For me 98 market worries will emanate from political violence and civil war threats affecting ASEA thru China or Europe thru Russia- if the problems are going to come look fro these two regions don't worry about 'economy' under AG the Fed has appeared as a very effective 'UN' of world finacial system, critics and skeptics will surely be disappointed- no one knows the number game and no one has the pulse of the global economy better than Fed 'Secretary General' Alan Greenspan.