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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Mark Nelson who wrote (481)	1/6/1998 12:15:00 AM
From: Rational	Read Replies (1) \| Respond to of 9980

Mark: Wow! You instilled confidence in my "radical" vision. I think there is a big hype for US$ and panic for many Asian currencies, deviating significantly from fundamentals, as I can read from Fed actions and pronouncements: Observe the following: * From WSJ: Greenspan broached the sensitive subject of stock prices in a speech, saying that "very rapid asset price declines" can be "a virulently negative force in the economy." * The deflation could ordinarily be expected to force the Fed to lower the interest rate. While this expectation sharply lowered the gold prices and gold stocks today, it should have had a highly positive impact on the rest of the stock market; but it did not. Today, NYSE had to halt after massive program selling. * Why doesn't the stock market like a lower interest any longer? Fed is accelerating money supply growth to arrest the rise in US$, which is attributed to overseas investors believing US as a safe haven for storing wealth. [Their exports stay here in US$, Treasuries and stocks!] But, trade deficits and current account deficits have soared. Corporate income/exports are dwindling, reducing the IRS income and raising the budget deficit. Thus, the Fed is effectively raising the interest rate (the real rate) by even holding the rate steady or lowering it somewhat due to the deflation and the increase in money supply growth. This has correctly permeated into the market with Greenspan's comment of very rapid decline in asset values. * I was sure last night that the market would react (erroneously) very positively, but it did not. This means that smart money is getting out of stocks to bonds and US$ and still smarter money is short on US$. * Obviously stocks which have ballooned in their value (due to an over supply of US$ funds) are likely to burst/shrink rapidly before steel mills and utility companies are dented, IMO. Sankar