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

To: IQBAL LATIF who wrote (19360)	8/17/1998 6:41:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

The so-called bearish market is not synonymous with a rising dollar. Imagine yourself as an international investor. First of all, rising dollar is not a sign of a weakening equity market, like, look at Japan - its the weakening yen and a weakening market, so same is the case with Rouble, and most of Asean countries, weakening markets are associated with weakening currencies. Since the last two years, rising dollar has been associated with this bull leg. In `96 we had $ against Yen at 107, so you can imagine what kind of productivity increases have been incorporated in US corporations that US products, domestically and internationally, have been able to match the production of countries having cheaper currencies. This can only be possible in corporates where top-line increases are matched with the margins, rather, the margins have been improving inspite of the rising currency. Coming back to my argument about you being an international investor - a rising dollar is in itself an insurance against bear markets because even if there is a protected bear market, a rising dollar is an automatic hedge. So, for example, a German investor fully invested in the US has seen this 10% Dow correction, correspondingly has also seen a 6% appreciation of US$/DEM, so basically, in his own currency, he's hedged. Secondly, the dropping bond yields reduce the cost of corporate interest and as such help corporate profits. I had a few days ago posted the relationship between S&P earnings and bond yields. At 5.5% yields, the market is slightly overvalued by 5%, but considering that global capital is an orphan capital searching for solid homes, a market like US is, after the bond, a safe haven. So you will see that even in these wild fluctuations, the trend of the market will remain intact and that is what the bears fail to realize. These are market realities and the bears will not comprehend this. (Typed as dictated by Ike)

To: IQBAL LATIF who wrote (19360)	8/17/1998 8:01:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

The Equity markets cannot neglect this downward movement of the yield curve from 18/05/98. The longer end and the entire curve is moving very nicely reducing the costs and the real interest rate this kind of movement is not a fear driven movement, a fear driven movement out of US will lead to upward pressure on the short end, this is a very mature move and appreciative of the internal macro economic strength of the market. bloomberg.com Ike (dictated)

To: IQBAL LATIF who wrote (19360)	8/17/1998 6:01:00 PM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

This is the kind of post I look back and enjoy, when I was dictating this to Samira all hell seemed to break loose but fundamental purist no-nonsense appraoch led to me to say even when markets in Europe and China were down-- ''Today, I would expect the market to be very volatile. I wish I could say that there will be a 500 point drop in Dow; looking at the charts now I can always follow the market and talk about huge bearish approach, but this is not what my indicators tell me. Consistency is one thing which my model maintains and it is only the macro-economic conditions of the US - if they start changing and bonds start telling me something else, I will have a different view. With Treasury now settling at 5.51, equity markets and dollar assets can only be helped.'' I am extremely satisfied with the read of the market and happy to see that we closed nicely,lets see what is in the store for us next..