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To: Tom Byron who wrote (8262)	3/12/1998 9:26:00 PM
From: Abner Hosmer	Read Replies (1) \| Respond to of 116770

Tom - The Fed said in their Humphrey Hawkins report that a lot of the increase in M3 over the last months is institutional money coming back from Asia. I mention this only to point out that the sole fact of an increase in the numbers for M1 M2 or M3 forms an insufficient basis from which to extrapolate broader conclusions about the economy. One should also examine the cause of the increase in order to consider these numbers in context. It is possible to see a large increase in M3 without the Treasury having printed a single note. regards - Tom

To: Tom Byron who wrote (8262)	3/12/1998 10:37:00 PM
From: Abner Hosmer	Respond to of 116770

The sky is falling.. US BANK EARNINGS HIT RECORD $59.2 BLN IN '97 economeister.com >>WASHINGTON (MktNews) - Bank earnings rose to a record $59.2 billion in 1997 from $52.3 billion in 1996, as just about every measure of the strength of the banking industry was at record levels, the Federal Deposit Insurance Corporation announced Thursday... .. Of historical note, only one commercial bank failed in 1997, the lowest total since 1962, and no insured savings institutions failed, the first time that has happened since 1959. With the two taken together, the single bank failure gives the lowest combined total since 1946.<<

To: Tom Byron who wrote (8262)	3/13/1998 2:32:00 AM
From: Abner Hosmer	Respond to of 116770

Tom - Trying to look beyond the surface of things here. For one thing, M3 includes money in retail money market funds. A lot of this money could be year-end bonuses, raises, and tax refunds that are on their way into the stock market or money being put into bond funds. Remember, real interest rates are high. I think we had a 1/4 point cut in rates early last year, Fed policy since then has been described as a passive tightening. Something else to consider, have a look at some of these extraordinary numbers and tell me what you think. If we can figure out how much of this money is making its way into the money-supply calculations, I think we'll have a much better idea what's going on. It's also evident that billions of dollars that were previously being directed back into Asia are no longer flowing in that direction: US Trade Deficit at Second-Highest Level Ever tscn.com >>The department said U.S. purchases of foreign securities slowed in the fourth quarter as Americans reacted to the financial crisis in Asia. At the same time, U.S. banks received an ''exceptionally large"" amount of foreign funds, it said. U.S. purchases of foreign securities slowed to $3.7 billion in the fourth quarter from $39.2 billion in the third. Meanwhile, foreign assets in the United States increased $181.9 billion in the fourth quarter, compared with an increase of $183.3 billion in the third quarter. For the full year, foreign assets rose $690.5 billion compared with $547.6 billion in 1996, the department said. ''U.S. banks received an exceptionally large amount of foreign funds in the fourth quarter,"" the department said in a statement. Foreign purchases of U.S. stocks increased more than five-fold to $66.9 billion from $12.6 billion. Foreign purchases of U.S. Treasury securities set a record in 1997 of $163.1 billion, up from the previous record of $155.6 billion.<<