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Technology Stocks : Novell (NOVL) dirt cheap, good buy? -- Ignore unavailable to you. Want to Upgrade?

To: EPS who wrote (23694)	9/1/1998 6:58:00 AM
From: EPS	Read Replies (1) \| Respond to of 42771

September 1, 1998 Is Global Collapse at Hand? By STEPHEN S. ROACH here can be little doubt that world financial markets are now in full-blown crisis. With yet another black Monday taking the Dow down 513 points yesterday, a sense of despair and desperation has set in. Global currency contagion has run rampant, from Thailand to Russia and all too many points in between. The International Monetary Fund seems to be out of bullets. Investors are stripping risk from their portfolios. Is there a way out? Resolving the crisis depends on why the market started to plunge in the first place. Did inherent flaws in the world economy cause the crisis? If so, a collapse of global activity could certainly be in the offing, leading to an outbreak of global deflation. Or was this crisis simply caused by a panic among investors and the inherent instability of financial markets? Put another way, are countries now completely insolvent, or are they just suffering from a temporary lack of funds? Worldwide deflation can't happen without a collapse in worldwide demand. For example, in the early 1930's world production and trade fell by 5 percent to 10 percent annually. Such a collapse is highly unlikely today. World gross domestic product is likely to increase by 2.3 percent in 1998, even with the crises in Asia and Russia. In the full-blown global recessions of the past, gross domestic product usually increased only about 1.5 percent a year. In other words, markets around the world may be crashing, but the global economy is probably not. That suggests that the market's reaction to fears of global depression and deflation are overblown. Indeed, before the steep market declines of the last several days, there were signs of healing in Asia. International financing positions as measured through the balance of payments went from deficit to surplus -- having the effect of transforming these countries from borrowers to lenders in world financial markers. Foreign companies were beginning to buy Asian enterprises at significantly reduced prices, thereby providing capital to previously bankrupt businesses. But given the events of the past several days, these market-driven solutions are no longer enough. Fear and panic in financial markets sometimes take on lives of their own, and that is now the risk. Under these circumstances, the United States and other leading industrial countries, as well as the International Monetary Fund and the World Bank, should take action that restores investor confidence. The time for a coordinated international response may now be at hand. Such an effort will need to include two important ingredients. First, all major central banks except Japan's must reduce interest rates. In return for being relieved of this responsibility, Japan would have to accelerate its financial reforms. Second, the I.M.F. must rethink its "rescue tactics." Specifically, it must relax its fiscal austerity requirements -- for instance, the mandate that governments cut spending -- and recognize that it is time to put banking reform on hold because it denies the expansion of credit to borrowers at precisely the time they need it. In short, central banks and the I.M.F. both need to focus squarely on crisis containment and put tangential considerations aside. Financial markets would probably respond quite favorably. In Japan and Russia, however, the impact on the financial markets would be more limited. That's because both countries suffer from more fundamental structural problems -- Japan's credit crunch and Russia's inability to collect tax revenue -- and thus require more radical solutions. Indeed, a world in crisis requires many of us to think the unthinkable. For example, I had long felt that the Federal Reserve's next move should be to raise interest rates; now I believe it should reduce rates to stem the crisis. But the Fed cannot be expected to do the job alone. This must truly be an international effort. There are risks in this approach. Lower interest rates would only boost domestic demand in an already rapidly growing and fully employed American economy, thereby setting the stage for a prompt policy reversal once the crisis subsides. Such an outcome, of course, is strikingly reminiscent of the Fed's policy whipsaw in the aftermath of the crash of 1987, when interest rates were reduced by three-quarters of a point and then raised by three points the following year. It certainly wouldn't be the first time history repeated itself. Stephen S. Roach is chief economist and director of global economics for Morgan Stanley Dean Witter. search.nytimes.com

To: EPS who wrote (23694)	9/1/1998 12:58:00 PM
From: dwight vickers	Read Replies (1) \| Respond to of 42771

Schmidt didn't think it was a bargain at much lower prices than this. Maybe he'll buy, but history says no. We are certainly due for a bounce in the market, but it would have been healthier to have a real public washout this morning, rather than an opening rally. I'll be buying puts in resistance. Stephen Roach thinks we'll have solid global growth? I wonder what he thinks of the loss of liquidity caused by falling markets. We've lost $2.3 trillion in market value since the top. And markets have been vaporizing wealth and liquidity around the world for months. My feeling is that the loss of capital will be a far more powerful force than wishful thinking from major wire house strategists. Dwight