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To: MR. PANAMA (I am a PLAYER) who wrote (15255)	8/30/1998 11:26:00 PM
From: Mark Fowler	Respond to of 164684

Patiently acquire leaps on key stocks and if a rally eventually takes place to 50 % of the fall then you can make 200 - 500 % returns with that leverage. Of course you risk it all so go out as long as possible.<< I just might do that haven't decided what i'm going to do as of yet. If we don't see a bottom in here soon then the market is possibly headed into a bear market that we haven't seen for a long time and your right a lot of fear out there, but is it a justified fear, fear of deflation which the yield curve suggests. I just came across some very interested reading: "I just came across some very interesting research that looked back at the US since 1920. During that period, a yield curve inversion led by a fall in long rates NEVER happened. I don't know about the rest of you but this came as a shock to me. In other G7 countries, it occured once in Japan in the first quarter of 1987 (the history for other G7 countries only went back to 1970.) Since 1920, there were two periods in the US when long rates fell to meet (but not fall below!) short rates while short rates were flat or falling. The first was in 1926-27, when the bond rally stalled with long and short rates at about the same level. Then the Fed tightened, inverting the yield curve and causing the Great Depression. The second was in 1989, when the bond rally stalled when long rates matched short rates. Then the economy weakened and the Fed led the move lower by easing. The US is currently in this situation for only the third time this century. Based on the two previous episodes, it does not appear likely that long rates will decline much further without a Fed easing. But who knows, maybe this time is different!" The only thing I am getting at was that yield curve inversion typical becomes obvious at a market peak - so as we are coming down, an inversion should be coincident with the top as in 1987 and 1989. You have to look at what is driving the flattening of the yield curve to an inverse position. If it is a rise in short rates, then that is trouble for stocks and the economy. If it is a decline in longer-term rates (as it is now),this is much more benign. But just how benign? And can the Fed hold short term rates as they're without hurting our economy or escalating the problems overseas as our economy slows. Perhaps, Greenspan and co. is holding short term rates steady until the market corrects to his level of "rational exuberance" to justify lowering short-term rates again. This could be 7500 or 7000 level on the Dow. (7500 level would be about a 20 percent correction from the high on the Dow.) The worst mistake the Fed could do now would be to raise short term rates. Or is this something more serious that's coming down the road on a Global scale??? Remember this is the first time in this century that an inversion of the yield curve has happened without the Fed. raising short-term rates. And every time the US had an inversion in the yield curve a market top/decline transpired followed with an economic slowdown/recession/depression or (maybe this time is different?) Caution!