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To: Lucretius who wrote (279)	5/15/1998 4:23:00 PM
From: Thean	Read Replies (3) \| Respond to of 14427

LT - heehaa on MU. MU with no shred of doubt broke down today with its close at $26 3/8, way below the $27 1/2 support. Yes, LT, we are going to have the short company on MU next week, at least on Monday. I'll give you my TA read this weekend (but do you still want it?) Drillers - bad! OSX broke down below 114 and oil tanked below $15 very convincingly to close at $14.46. Alex (are you Ramnoff?), sorry to hear you did not get completely out in time. This is really going to cause chaos on the driller TA. Why? 1. The support trendline for OSX is now broken. Many drillers have already broken theirs too. MDCO, CDG and many land drillers are particularly weak. We know lands are bad but with the recurring news that the offshore rigs (especially shallow market) are rolling over at lower dayrate I think the immediate future (at least 3 weeks) is not terribly good. 2. For once it is going to take longer for the short term stochastics to bounce back and IQC's long stochastics has not touched the 20% line for either lines for many drillers. 3. BB's are showing surfing the lower band and not a rebound. 4. But still, the key indicator is going to be oil. At this point, as with all momentum sentiment, the oil traders are beginning to work up the scenario of a double bottom for oil. The bottom is at $12. That's what they live for - volatility. Steve - I think I would hold off doing any driller option until a further trend is clearer. It looks to me we are going to have a W instead of a U, but no confirmation yet. Indonesia Situation - Don't ever estimate the staying power of Suharto. This guy is a fighter and a winner for three decades. He's not going to give up that easy. I'm not sure if he steps down it is good for the region. That part of the world needs strong leaders and strong government. Dictatorship over there is not a bad idea. Without political stability one can talk political and economic freedom all one wants but the immediate concern is to get food to the mouth and to live tomorrow. I came from that part of the world, just to put things in perspective. What it means for us is a prolonged uncertainty about the Asia Pacific market and hightened pain of US companies doing business there.

To: Lucretius who wrote (279)	5/16/1998 6:38:00 AM
From: Teddy	Read Replies (2) \| Respond to of 14427

I can't see why anyone believes there is even the slightest chance that interest rates will go up: The Fed Won't Move By David Barrett 5/16/98 12:15 AM ET Both the U. S. economy and financial markets are racing forward producing consumer euphoria and unprecedented investor satisfaction. Can it get any better than this? More accurately, can we expect the economy to continue to grow at a rate of 4.2% as it did in the first quarter of 1998 without inflation? Will the rate of growth subside on its own without central bank intervention? Is the Federal Reserve prepared to act now or later, or are they simply making Fed noises to assure everyone that they haven't fallen asleep? The answers to these questions involve less guess work than certain economists who are campaigning for higher rates would have you believe. Certainly some Fed members want higher rates. But the predominance of their hawkish views is outsized compared with the real level of concern at the Fed. Fed Chairman Alan Greenspan and other Fed members are no doubt paying attention, but they are not overly anxious to pull the interest-rate trigger. The nut of the issue is that inflation has not reared its ugly head. Therefore it's difficult to see how the Fed could take action. The markets, using the Fed-funds futures as a barometer, do not anticipate a rate hike anytime soon. Those who associate inflationary pressures with a robust economy are wrong. Inflation does not flow naturally from a robust economy and never did, but rather results from the introduction of new money at a time when the nation's productive capacity is at its limit. Money and only money can produce inflation. Robust demand alone will not cause prices to rise, rather price increases are the effect of too much money chasing too few goods. Are we approaching our capacity limit? No. Capacity utilization is currently at 82.2% whereas the 1967 to 1997 average is 82.1%. What about the supply of labor? Yes, the unemployment rate is low, but, as the demand for goods and services continues to grow, we will move the orders to Mexico, Indonesia, Germany and other countries. Corporate America will do whatever it takes -- including cutting back the domestic staff -- to keep prices down and thus preserve profits and market share. And raw materials? Commodity prices, lead by oil, remain weak. With East Asia, Japan and Russia in deep recessions and with double-digit unemployment afflicting Europe, there is virtually no chance of price reversal. And the dollar? The dollar is strong and appears to be getting stronger -- just one more piece of disinflationary news. Can we conclude that there is nothing to be concerned about? For now, the answer to that is a hearty yes. Further down the road, the increasing trade gap might create some problems -- but that is well down the road. Finally, the Fed faces many international reasons not to raise rates. The looming European Monetary Union has European central banks quietly urging the Fed to sit tight. In Asia, stumbling economies are also making it hard on the Fed. These economies need the American economy to remain robust in order to help them battle out of their economic crisis. The Fed staff expects that the expansion of economic activity will slow appreciably in the next few quarters and remain moderate in 1999. They believe that slower growth abroad and the considerable rise in the dollar's value will restrain exports and subject domestic producers to greater competition. Thus the significant risks associated with a so-called preemptive upward move in rates at this time would appear to greatly outweigh any potential gain. The Fed's litany of reasons to remain on the sidelines may disappear if the U.S. stock market keeps driving higher. The Fed can live with Dow 9000, perhaps even Dow 9200. But it doesn't seem that they'd like Dow 9500. At that point the "do something" crowd takes over. As we look upon these lofty levels, we should bear in mind that the entire thrust of American policy has been to emphasize investment rather than consumption. Pension plans, 401(k)s and IRAs are responsible for putting as much as $35 billion of new money into the stock market each month. One small possibility is that the Fed might look to take some wind out of the market's sails by increasing the discount rate. Unlike the Fed-funds rate, which is widely quoted and widely used, the discount rate is far more symbolic, and it would have little meaningful effect. (The Fed-funds rate is what banks charge each other for overnight loans. The discount rate is what the Fed charges at its so-called discount window when banks come in to take out loans.) Unfortunately, the banks would probably use the occasion to raise the prime rate to increase their profitability. On balance, this is a very bad idea. The Fed could also increase the reserve requirements on consumer loans if they are concerned about spending. The Fed may choose one of these lesser options on Tuesday, but the bet here is that nothing will happen. By Tuesday afternoon, we will be waiting and wondering about July's meeting.