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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Michael Berkel who wrote (654)	1/13/1998 6:04:00 PM
From: Michael Berkel	Respond to of 18691

Kaufman said in the short run, unless a successful Asian bailout can be put in place, "it is highly likely that the Japanese financial system would come under renewed scrutiny. "If so, there is a risk of credit rupture of such monumental proportions as to shake the very foundations of the world's financial markets," he said. And Kaufman said that until the instabilities that result from large-scale capital movements in a world of globalized, securitized financial markets are realized, "there is bound to be a recurrence of crisis somewhere else at some point." Kaufman said the danger of the current Asian financial crisis is compounded by "deep-rooted, structural problems in Japan where financial institutions have been seriously impaired since the collapse of the financial bubble of the 1980s. "The totality of the Asian financial debacle potentially is therefore far greater than the Latin American financial problem of the recent past," he told the Japanese Society of Canada on Tuesday. "Despite all the handwringing and tough talk, there is unfortunately no alternative to a huge bailout. Too much politically and economically is at stake" Kaufman said against the backdtop of the Asian crisis, the Federal Reserve will probably lower the Federal funds rate. Whether or not an initial 25 basis point reduction would bolster the equity market in the United States is far from certain, Kaufman said. "The performance of corporate earnings is likely to be the more decisive factor," he said. Kaufman said big cuts in official US rates are highly unlikely. Withy the U.S. econpomy operating near full employment, cautious easing is more likely even though the current structure of interest rates has built into it an inherent 50-basis-point decline in the funds rate, he said.