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To: Lee who wrote (45044)	6/5/1998 1:53:00 PM
From: AlanH	Read Replies (1) \| Respond to of 58727

Lee -- Re:<<Project A trades>> Curious, isn't it. One could point to dollar strength, fed liquidity action, a less bad than expected number, arbitrage, etc. The numbers don't look so good to me. (Glass 3/8 full.) My hunch is we'll see this activity across markets as FMs attempt to play catch-up on the slightest provocation. As far as I'm concerned, this is an exceptional opportunity -- if you can identify patterns. Feast, food poisoning. Later, as time permits, I'll try to post a more substantive, detailed swag.

To: Lee who wrote (45044)	6/6/1998 12:02:00 AM
From: AlanH	Read Replies (1) \| Respond to of 58727

Lee, getting back to you on bonds, econ data, etc... There are far too many variables to correlate things. So, I'll throw out baby with wash and oversimplify things. <g> According to the final options and volume for Project A session for June 4, looks like there was buying in the 121P and 122P... I think since it was pretty light that it was hedging, (hindsight). Agreed. The amazing thing was that markets didn't even flinch at the employment numbers. Given little time to assimilate data, a direction was establish and gained inertia throughout the day. The media spin was that bond traders had become indifferent toward economic stats. More likely, it was a combination of the following: * The belief that FOMC is wedged for now. * Reallocation of risk across the yield curve. * Currency valuations. * Squaring of positions. Another possibility is that smart money is flowing from stocks into bonds. The implicit game is that if done properly, stock prices can be propped by the very flow of money into bonds -- assuming greater fools (and there are plenty). Generally, as bonds become relatively expensive, stocks become more attractive; so, you can imagine a cross-current. Eventually, lower corporate profits and muted GNP will create a more notable flow from stocks into bonds. All the while, FOMC is playing a devil's game with reserve aggregates, so interest rates appear muted. Today was a dud for a bond sell-off and worse CNBC saying the loss in manufacturing jobs, (26k) due to Asian slowdown. Did we sell them clothes? I don't think so. Ah, the game isn't just US manufacturing; it's that goods are being manufactured elsewhere and sold at lower prices. Mfg sector recognizes this (and, to some extent may acknowledge that the FOMC 'gift' won't last forever). Just wait until money supply begins to contract -- and, I'm not just talking about reduced M3 via margin requirements. Are we having foreign buying of bonds since it's not a flight to safety from stocks today? For some, bonds are the best game in town, er, world. However, there exists the threat of re-pat'ing government notes, which may temper matters. (The possibility even exists that foreign money into stocks is assisting the flow into bonds.) The whole idea of excess cash -- if you buy that -- suggests reduced competition b/t alternative instruments. BTW, is current demand for US$ really a good thing for stocks? Of course, this is all subject to debate; we could point to alternative decades in support or detriment of/to these simplistic ideas. JMO, and I'm certainly interested in yours. Regards, Alan