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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (18602)	6/14/1998 10:51:00 AM
From: Riskmgmt	Respond to of 50167

Ike: Very nice and well thought out essay. I agree with you especially on the interest rates so does Yardeni. PUNDIT WATCH WHAT'S NEXT FOR INTEREST RATES? PUNDIT WATCH Abby Cohen Edward Kerschner Edward Yardeni Ralph Acampora Elaine Garzarelli Byron Wien David Jones Edward Hyman Charles Clough Barton Biggs Elliott Platt Michael Metz SCORE ONE for Ed Yardeni. Ever since we've been keeping score, the Deutsche Morgan Grenfell strategist has forecast a bond market rally for this year. So with the yield on the bellwether 30-year Treasury bond at an historic low, we asked Yardeni what he thinks will happen next. His answer? More of the same. Yardeni, our No. 3-ranked pundit, says that as economic conditions worsen in Asia and Wall Street digests slower earnings growth, bond prices will keep going higher, pushing down yields even faster than he originally expected. "We are rocking and rolling toward my target of 5% by year's end," Yardeni says. "The way it's going, rates could hit 5% by September or October." Likewise, he thinks that his year-end 1999 forecast for rates to drop to 4% could come earlier than he thought. (Long-term rates are currently at 5.67%.) The reason? International investors are flocking to safer U.S. Treasurys as the Asian economic crisis spreads to developing economies like Russia and Latin America. "We are on the verge of global deflation," Yardeni warns. "One-third of global economies are in a depression or recession or about to fall into one." The bogeyman for many developing countries, which rely upon selling things like oil to spur economic growth, is collapsing commodity prices, Yardeni says. In turn, goods produced in Asia cost less. That doesn't bode well for stocks, says Yardeni, who believes the end of the bull market is in sight. Lower prices for goods will translate into declining corporate earnings. Yardeni has been calling for a 30% correction for stocks by the end of 1999, starting with a correction in the Dow to 8,000 by autumn and then a dive to as low as 6,500 by midyear 1999. -- By Karyn McCormack