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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: robnhood who wrote (15509)	4/4/1998 4:44:00 PM
From: Tommaso	Read Replies (1) \| Respond to of 94695

The old-fashioned runs on banks occurred because of a history of banks' going completely under and depositors never getting their money back. I suppose uneasiness about quick access to one's money could cause a brief disturbance of the banking system--and there would be a lot of confusion if only a small percentage of depositors insisted on receiving cash. My guess is there could be some local riots--as happens for much more ludicrous reasons, such as a desire for a Cabbage Patch Doll. I think some people were hurt locally years ago when the K-Mart had a special on some Texas Instrument computers--worthless junk as it turned out--at $50 each. I keep saying that I think the mutual fund is our equivalent of the nineteenth-century bank account. I really think that there are a lot of people who consider that they can get all their money right back out any time they want it. I can see panics in that case--and I would not want to work in a brokerage when it happened. As a matter of fact I would tell my wife to take a different way home from work if the market crashes. Her usual route goes past a couple of brokerage offices.

To: robnhood who wrote (15509)	4/4/1998 8:29:00 PM
From: Investor-ex!	Respond to of 94695

russell, ..there has been some talk of a run on banks sometime next year because of the y2k thing. It struck me that an incentive would be required to prevent this. One that came to mind was high rates for leaving your money on deposit.. Just a rambling thought I pondered your post as I was walking around the lake today, finally arriving at the general question of asset positioning as we move into the millennium transition. Depending on the degree to which y2k issues are brought into the public foreground, there may be something of a rush into "safe" assets, a hedging derivatives explosion, or both. Since we appear to be in an of era manias, y2k just may create a little "mania" of its own. This begs the question, just exactly what IS a "safe" asset in this environment? My list in order of decreasing safety: Cash Bonds Real estate Gold, oil Stocks (US) Cash is #1 because it's liquid, yet still earns above inflation interest. In fact, if global deflation ever kicks in, it will be THE asset class to own, as it becomes more valuable with each fall in prices. This leads to the question of currencies and it would appear that the global market has already selected the y2k currency of choice and it is the US$. The Euro won't be ready and none of the Asian currencies can cut it. The pound and mark are clouded by Euro questions. I don't think people will resort to mattress stuffing. If anything, banks and money markets may become stuffed with cash! Though, this does not necessarily imply that a bank or mutual fund's stock will do well. For those willing to tolerate a bit of risk, bonds will be very popular. Short rates will drop lower and lower because so much money will be willing to park itself in short term bonds (US bonds especially). Intermediate bonds will do well, too. Long bonds would do ok too, but, as always, will require better timing. As for hard assets, the safest, for now, would be real estate, as it usually produces income, beats inflation most years, and each piece is rather unique, but real estate is not at all liquid unless a REIT is used. Unfortunately, these have gotten pricey along with stocks. Gold and oil are the next choice, but only because they may have bottomed around here. The danger with these assets is that, as international commodities, they are priced in US dollars. Since the US$ is very likely to be the y2k currency and will tend to rise, oil and gold will have very hard time appreciating appreciably. Finally, we have stocks. These are at the bottom of the list for two reasons. First, in light of recent earnings growth, valuations are absolutely ridiculous, even with falling interest rates. Second, it is from this asset class that money will tend to leave and "park" itself in the safety of cash and equivalents while 2000 comes and goes. Who wants to risk owning a company whose software may freeze or run amok on 1/1/2000? Even if a given company is ready, its counterparties may not be. If money does not flee stocks, then there is going to be an awful lot of hedging going on. Look for option premiums to reach an all-time high in 1999. The next few years are going to be very, very interesting, to say the least. Obligatory Disclaimer: Marco-economic predictions from a software developer on his afternoon constitutional -- use at your own risk! :o)

To: robnhood who wrote (15509)	4/5/1998 10:50:00 AM
From: Bonnie Bear	Read Replies (3) \| Respond to of 94695

RR: run on banks: hmm. I saw the mysterious plunge and after-the-fact Goldman Sachs warning of SDTI as a contrarian indicator. Security on the internet is an iffy thing, I can imagine a run on brokerages, not banks, as people are unable to access their brokerage accounts or find the contents missing one day through a y2k security breach nobody thought about. And then they find out that unlike banks, the brokerages don't have to give them their money back- most people don't read the fine print on their brokerage accounts with their attorney at hand. In a scene like this, people would be ripping money out of stocks and brokerages and racing back to CDs at their local bank. I've been told that the Security Dynamics hardware-based encryption products are the only safe way of safeguarding against a widespread electronic meltdown of computer security systems, we have been increasing our use of them. IMHO SDTI might be a buy here for anyone interested in y2k plays.