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To: Cynic 2005 who wrote (2639)	6/26/1998 12:11:00 PM
From: Joseph G.	Respond to of 86076

<< While the weak economic climate in Asia has had a negative effect on the U.S. equity markets>> SPX went up only 40% on zero earnings growth, if Asia were OK, should've gone up 140% on negative earnings growth?

To: Cynic 2005 who wrote (2639)	6/26/1998 1:34:00 PM
From: Joseph G.	Respond to of 86076

Where is the Samuelson-Kaufman break? -g- <<Economist Kaufman warns US stock prices may plunge NEW YORK, June 26 (Reuters) - The Federal Reserve should raise interest rates ''at some point'' to cool the U.S. economy and asset price inflation or it could face a painful stock market swoon, economist Henry Kaufman said on Friday. ''The financial bubbling in the American financial system is an untenable situation,'' Kaufman, president of Henry Kaufman & Co. Inc., said in a speech prepared for a Federal Reserve Bank of Boston conference on business cycles in Chatham, Mass. ''The way events are unfolding now one of several events will topple the exuberance,'' according to a copy of the speech released here. U.S. stocks have surged in recent weeks, with most indices either at or near record highs. A more open, deregulated, securitized and global financial system and rapid development of financial derivatives will require relatively steep increases in short-term interest rates to slow the economy and check inflation pressures, much as they did in England this year, Kaufman said. ''(The Bank of England) has imposed the highest short-term interest rates of any advanced country and yet the U.K. economy still manages to chug along at a brisk pace, further tightening taut labor markets and imparting an upward tilt to wage and price inflation,'' he said. ''At some point the Federal Reserve may face a similar dilemma as the possibly transitory factors holding down the U.S. rate of inflation -- namely as high value of the U.S. dollar in the currency markets, weak economic activity in Asia that keeps many products highly competitive, and low commodity prices -- are reversed,'' Kaufman said. The economist said the deregulation and globalization of the world's financial system could worsen the current U.S. profit squeeze, weaken the Japanese economy and halt the flow of foreign funds into U.S. markets. Kaufman said it is not a question of whether any one of those would happen, but when. In that context, the Fed would be forced to ease credit sharply to offset a sharp slowdown in U.S. growth. ''In the immediate aftermath of such an event (as a stock market correction) the central bank will then try and counter the sharp declines in asset prices by easing monetary policy significantly,'' he said. ''Thus, today's euphoria in the stock market will be followed by a sharp stock market correction, and in this carnage long government bonds may very well fall to a yield of four percent. After that, I suspect a more definitive monetary strategy incorporating financial behavior is likely to be formulated,'' Kaufman added. Recent changes in financial markets render obsolete conventional methods -- such as setting target ranges for money supply growth -- for anchoring monetary policy, Kaufman said. As such, Kaufman called for improved supervision and regulation of financial institutions and markets from the Fed and global regulators. >>

To: Cynic 2005 who wrote (2639)	6/29/1998 11:33:00 AM
From: Joseph G.	Respond to of 86076

<<ISI Company Survey Index 50.9 in June 26 week NEW YORK, June 29 (Reuters) - The International Strategy & Investment (ISI) Group Inc. said its weekly company survey index fell to 50.9, its weakest reading since January, in the week ended June 26 from 51.2 registered in the prior week. The survey's four-week moving average also fell to 52.6 from 53.8, the ISI report said. ''In a somewhat unprecedented pattern, our surveys indicate that the manufacturing sector is slowing the front-end of the economy,'' said Jason Trennert, vice president and economist at ISI Group. ''Although higher stock prices and increased refi activity may eventually lead to stronger consumer spending readings, the (General Motors) (GM - news) strike and a likely correction inventories suggest that the economy is likely to slow further,'' he added. The drop in the indexes was led by homebuilders, manufacturers, ISI said. Each week, ISI surveys nearly 100 retailers, auto dealers, manufacturers, homebuilders and banks for their views on the current state of the economy. >>