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To: KENNETH R SANDERS who wrote (35858)	3/27/1998 2:25:00 PM
From: Lee	Respond to of 176387

Kenneth,..Re:<<Long term rates>> In Feb '96 rates increased to the 7%+ level while the S&P hardly noticed and kept making new highs. For the past 3 years the Dow has performed admirably even with rates near 7%. Two charts are shown below. One shows the cash bond interest rate over the past 3 years - Tyx and the other shows the cash S&P over the same time period. The S&P doesn't look hindered by interest rates. chart1.bigcharts.com:80/report?r=cobrand&site=dailystocks&onbad=cobrandsymb&symb=SPX&time=10&uf=0&sid=3377&sec=x&xyz=72222828&s=12003 chart5.bigcharts.com:80/report?r=cobrand&site=dailystocks&onbad=cobrandsymb&symb=tyx&time=10&uf=0&sid=11421&sec=x&xyz=72180593&s=22499 Tyx While, it is true that the Fed was biased toward tightening in the Nov/Dec time frame, it is also true that they changed this bias to neutral after the SE Asian monetary crises. The Fed has already stated that they expect a minimal impact to be apparent in late Spring or early Summer in our economy. So it is mostly expected that the Fed will hold rates steady until significant evidence exists that there will be an affect from SE Asia. Furthermore, given that the jobless rate is the lowest in more than 24 years, it's hardly likely that manufacturers can expand more even if orders do not slow significantly. So, even with the increased domestic spending, capacity is strained and if a falloff in exports doesn't relieve this capacity constraint, then the availability of qualified workers to expand will certainly put a brake on additional expansion. Sorry to be so long winded. Lee