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

To: Derrick P. who wrote (2023)	2/9/1998 11:06:00 PM
From: posthumousone	Read Replies (1) \| Respond to of 9980

i just read this in the ny post: freerepublic.com any thoughts on bailouts? WORLD EVENTS BEGINNING TO CROWD IN ON MARKETS By JOHN CRUDELE ------------------------------------------------------------------------ EVEN Alan Greenspan couldn't save the bond and currency markets last week with his talk of a strong economy and subdued inflation. And right now I'm going to give you three reasons why there are a lot more problems ahead for interest rates and the dollar: Washington scandals. Iraq. And Asia. The last thing first. As much as Wall Street would like you to believe that the Asian situation has calmed down, it hasn't. Foreign bailouts are only masking the difficulty and buying time. And things could be getting worse for us because of the Asian situation. If Asian governments and companies start defaulting on loans - a very likely possibility - then the urgency and immediacy of the Far East situation will finally hit the American economy with full force. Given the current environment in Asia, it won't take a whole lot to convince foreigners to repatriate assets that have long been held in U.S. financial markets. In the first place, the scandals in Washington raise questions about the viability of the Clinton administration. And the expected action against Iraq could also panic foreign investors, especially if the U.S. has to use force without at least a nod of approval from other countries. Not that Asians need much reason to bring their money home. For one thing, by pulling money out of America and investing it in the Far East, Asians have a shot at reviving their economies in the shortest period of time. But there's a second benefit. Pulling out of the U.S. by essentially dumping dollar-denominated investments like, say, U.S. government bonds, will also force down the bloated value of the American currency and allow Asians to repay their loans to Americans more cheaply. Iraq's affect on the U.S. financial markets is a little murkier. Nobody can predict what will happen between the U.S. and Iraq. A lot will depend on whether President Clinton feels politically powerful enough at this time to take an aggressive position with Saddam Hussein. If the U.S. attacks, then foreign capital will flow out of this country and the bond and currency markets will sink. But I don't think Clinton will be able to take military action against Iraq. Here's why: In the next few weeks, the president will come under intense pressure from Independent Counsel Kenneth Starr. As this column has said for many months Starr is preparing a report under section 595c of the Independent Counsel act that could possibly lead to Clinton's impeachment. In fact, a source close to Starr predicted to me recently that there is less than a 50-50 chance that Clinton will survive the report, and maybe as little as 10 percent. And the wrongdoing isn't just about Monica Lewinsky, the intern. In fact, her alleged relationship with the president will be just one part - the last part - of an "evidentiary summary" that will be given to the House Judiciary Committee's Henry Hyde. And I learned last week that Hyde, through intermediaries, has been secretly asking that the Starr report be turned over to him promptly. The Independent Counsel's office, meanwhile, is trying to determine whether the report must first go to a three-judge panel that put it in business because some of the evidence is secret grand jury testimony. The timing of all of this is very fluid and depends greatly on whether Starr ends up going off on any other tangents like the Lewinsky matter. But the result that all of this will have on the U.S. financial markets is quite obvious. Bonds and the U.S. dollar fell sharply two weeks ago when the media ganged up on the president. What about the stock market? Well, stocks seem to rally whenever a presidential scandal erupts. And since there is no logical reason for this to happen, some pretty smart people on Wall Street are scratching their heads and wondering just what kind of magic Washington is sprinkling on the stock market. But you can be certain of one thing. If the political situation gets as chaotic as I expect, the stock market will wake up and fall down.