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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Derrick P. who wrote (5762)	8/21/1998 11:47:00 PM
From: Stitch	Respond to of 9980

Derrick, You pose some great questions in your last post and I eagerly await answers from those wiser then me. I too have enjoyed the debate going on here and hope it continues. Best, Stitch

To: Derrick P. who wrote (5762)	8/22/1998 9:17:00 AM
From: Zeev Hed	Read Replies (2) \| Respond to of 9980

At one point yesterday, the 30 years bond rate was below the Fed rate (overnight), something must give, either the Fed reduces its rate of the long term bond rate will decline. The Fed is actually in a box, since they feel that paper assets (stock) are overvalued and "bubbly", they do not want to stimulate the market by an easing move, they almost cannot. Once we shave another 1000 points from the Dow, the Fed will be able to move, and that will put some breaks, IMHO, to the current malaise on the street. I do not think that will happen very soon (next two months or so). My reasoning is that the cure for Asia has to come from within Asia itself, namely Japan must do something very drastic to stimulate domestic demand which will soak Asian over capacity. Until Japan shows a plan to that end, the Yen will continue to weaken, IMHO, and this time, the Cavalry (Rubin) will not come to the rescue unless he gets concrete concessions. This is one reason I believe hat the yen could breach 150 yen/dollar before intervention will occur. I have 156 yen/dollar as a potential high for the near future, but what happen after that, I have no visibility. The damage inflicted on the Asian economies is severe and could lead to a depression there. In that case, we might, IMHO, get a recession, namely at least two quarters of negative growth. Zeev

To: Derrick P. who wrote (5762)	8/22/1998 5:00:00 PM
From: MikeM54321	Read Replies (1) \| Respond to of 9980

"I believe there's a good chance of corporate earnings actually declining the second half of this year, contrary to the double-digit growth which Wall Street is still projecting. That's a huge difference...... The Fed is responsible for the worsening situation in Asia, along with the IMF. The high interest rates being pursued by the Fed are totally uncalled for in this environment of minuscule inflation and declining economic activity. As a result, the U.S. dollar is soaring, damaging even further the precarious state of the Asian countries." --Bert Dohmen, The U.S. Economy and the Fed _______________________________ Derrick, That was a good article you posted. Thanks. I too agree that Robert Douglas(fellow SI poster) is very knowledgeable about interest rates and the economy. I am in disagreement about inflation being a concern though. I'm of the belief that the Fed is not going to raise rates at any time in the foreseeable future to fight inflation. It would be too risky considering the corporate earnings slowdown. Along related lines I found the following excerpt. Thanks, MikeM(From Florida) _______________________________ "We believe interest rates, not earnings, will be the strength of the bull market over the next year. Both top-down and bottom-up analysts are continually lowering their earnings estimates as companies report weakness (partly due to the Asian affects). We continue to look for flat S&P 500 earnings into 1999. Our bond model, however, continues to suggest yields will continue to decline based on low inflation and the budget surplus. As the budget stays in surplus, there is less need for the government to issue more debt which, of course, limits the supply of bonds and causes yields to continue to decline. This should be the fuel for the stock market's continued rise even with the flatness we anticipate in earnings." --Elaine Garzarelli, CBS Marketwatch.com