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To: marc ultra who wrote (162)	8/19/1998 3:39:00 PM
From: Justa Werkenstiff	Read Replies (2) \| Respond to of 15132

Lehman Perspective on the Prez. Marc and All: Headline: Politics: Clinton Scandal Update Author: Tom Gallagher 1(202)452-4762 Company: Country: GOV CUS Industry: NOINDU Today's Date : 08/10/98 * We don't think the scandal has been a major factor in the stock market's poor performance lately. * The most important question in the scandal is, what will cause the public to change its mind? Even last week's polls continue to show public indifference to the scandal. A few points: First, we don't think the scandal was much of a factor in last week's stock market troubles. The best measure of the financial reaction to a possible Clinton crisis came on July 28, the day the Lewinsky immunity deal was announced. As soon as that story hit the tape, stocks, bonds, and the dollar all sold off. But as stocks were getting pummeled early this week, bonds and the dollar were rising. That strongly suggests that Asia, not Monica, was on the minds of investors this week. A looming scandal no doubt contributes to negative market sentiment, but it's hard to believe Tuesday's stock market sell off would have been much less than 299 points if we'd never heard of Monica Lewinsky. Our point may have negative implications for the markets -- there may be worse to come if the market hasn't really discounted a worsening scandal for Clinton. Second, the scandal should be a source of volatility for the markets for the next few weeks, probably until Special Counsel Ken Starr files his report to the House Judiciary Committee. That may sound like an unexceptional statement, but we don't think any thing stronger than that can be justified at this point. What we like to do in situation s like this is construct scenarios that the markets might react to. But the lack of good information and time frames on the investigation make charting a course of events little more than a parlor game. That's because there are so many possible scenarios that no one seems to us as more likely than another. Third, to us the most important political question is, what will cause voters to change their minds on this scandal? The biggest difference between now and late January, when the Lewinsky revelations first appeared, is that we have six months of polling evidence on public attitudes. We and most political observers thought the public would have been more outraged at the allegations, but the public has been pretty constant in their indifference to them. This trend continued in polls this week, after the Lewinsky immunity deal and thorough press coverage of the dress. So, what would it take to change what has been a durable trend? A straightforward read of the polls would indicate good evidence of obstruction of justice, and we won't know that until Starr submits his report. But perhaps graphic descriptions of Clinton's alleged encounters might move some voters. Or, what if Clinton persists in denying a relationship when forensic evidence confirms that he did? Our favorite candidate for changing voter attitudes is a deteriorating economy, as we've outlined before. Answering this question is central to determining where this scandal is headed. If the consensus view is right and presidents can't be indicted, then the next step, if there is one, will be an impeachment inquiry by the House. That makes it a political, not a legal process, and House members will check the polls carefully. Unless the polls show a change in public attitudes, impeachment is not a good bet at this stage. ----------------------------------------------------------------------

To: marc ultra who wrote (162)	8/20/1998 12:40:00 PM
From: marc ultra	Read Replies (2) \| Respond to of 15132

re:more testing? Nice light volume drop here, may be setting up for third test of the initial correction lows. I continue to like the idea of a correction extended a bit in time like this one. After the history lately of corrections followed almost immediately by explosive rallies it is healthy to give the programmed buy the dips crowd something to think about and shake out some of the more nervous of the nellies. Also has reopened the buying opportunity again at least for the moment. Marc