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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Peter Singleton who wrote (22)	9/3/1998 10:28:00 AM
From: Sam	Respond to of 2794

Peter, Henry, Clark, RE: a crash scenario With the Fed now effectively tightening by not doing anything and allowing an inverted yield curve, and effectively forcing other countries--especially those heavily dependent on commodities and therefore getting slaughtered over the past few months--to raise their rates, suppose Greenspan suddenly changes course after the market "corrects" to, say 6400 or 6500, and lowers both the discount and the Fed Funds rates by half a point from here? Heck he has room to lower them a full point if he wanted to, presuming the CPI to be vaguely correct in gauging inflation. Wouldn't that almost immediately lessen the pressure on other countries as well to raise their rates to attract capital, and allow them to lower a little, allowing some rate relief internationally and perhaps stimulate some demand? Or am I being naively optimistic here? I think he (Greenspan) is waiting to see the "whites in their eyes" before lowering, and he will aggressively lower when he does. By "whites in their eyes", I mean cries of fear and agony from a crash. He has a hero complex, IMO, and wants to come charging in on his white horse to save the day and to cement his reputation for posterity. Meanwhile, in my opinion, he is holding rates irresponsibly high right now. P.S. Thanks all for the Kabul tales.

To: Peter Singleton who wrote (22)	9/3/1998 10:28:00 AM
From: Worswick	Read Replies (1) \| Respond to of 2794

Petter hello this am. Do you remember George Soros problems with the Chicago exchange in 1987? He was, as I recall, long a huge number of puts on the S&P. So much so that the exchange I think but am not sure was unable to "cover" his puts. It seemed to me that they stopped trading rather than honor their obligations to Soros. Something like this. When they started trading again the market had gone up and Soros's positon was substantially imparied. A law suit ensued. Bascially, the house changes the rules when it suits the house.

To: Peter Singleton who wrote (22)	9/3/1998 10:32:00 AM
From: Henry Volquardsen	Read Replies (1) \| Respond to of 2794

Peter we have been having similar discussions on the currency thread. Subject 20640 There are certainly risks to the financial system and I would not be surprised to see the current downturn become quite nasty. I also think the situation in the emerging markets is going to continue to worsen. But markets change and history mat repeat but it never repeats precisely. One thing to remember was that the Great Depression got as bad as it did not because the equity markets collapsed, that was just a spark. The depression became so severe because of a series of idiotic policy actions through out the world. Also much of what is happening in Asia is because of the over investment that occurred in the 80s. I posted about that earlier today on the currency thread. The US did not have a similar situation. Also there is a very real revolution in technology that is powering the US economy. Much of the Asian investments that are causing trouble were in older technologies. So while I recognize that we are in a very volatile if not revolutionary period, I believe the long term underlying fundamentals for the US are actually quite good. That doesn't mean things can't get screwed up. But if I have to chose what I think the long term holds I side on being more optimistc for the US. However I am aware of the risks to that scenario. Henry