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

To: Tim Luke who wrote (974)	9/4/1998 6:54:00 PM
From: mark g	Read Replies (1) \| Respond to of 7247

Any rally from an interest rate decrease may only be short lived. If it resulted in a race to buy dollars that would further weaken an already precarious currency market. The U.S. and Europe will be trying to make it easier for the hardest hit economies to export more goods. Anything that hindered these economies from competing would likely make a bad situation worse. Considering that 50% of the jobs in the U.S. are a result of world trade, messing with the rather fragile situation we have now might be playing with fire. Countries recalling their foreign reserves would not help at all. Of course, this assessment could be completely wrong and an interest rate drop could be the best thing that ever happened, however there is not much going on right now to indicate that it would. BWDIK, Mark

To: Tim Luke who wrote (974)	9/5/1998 7:36:00 PM
From: BubbaFred	Respond to of 7247

I find Greenspan's speech (full text: biz.yahoo.com ) on the bearish side of neutral: "It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress,..''. Reuter's comments: "... the chairman of the U.S. central bank warned that global financial turmoil and Wall Street's volatility may hurt the U.S. economy and suggested he was as inclined to cut interest rates as to raise them. In his first comment on recent tumbling stock prices, the world's most powerful central banker said the Fed now saw a balance of risks facing the U.S. economy between deflationary pressures from international crises and domestic inflation." Greenspan also pointed out the following: "The second consideration with respect to how high asset values can rise is: How far can risk and equity premiums fall? A key factor is that price inflation has receded to quite low levels. The rising level of confidence in recent years concerning future outcomes has doubtless been related to the fall in the rate of inflation that has, of course, also been a critical factor in the fall in interest rates and, importantly, the fall in equity premiums as well. Presumably, the onset of deflation, should it occur, would increase uncertainty as much as a reemergence of inflation concerns. Thus, arguably, at near price stability, perceived risk from business-cycle developments would be at its lowest, and one must presume that would be the case for equity premiums as well. In any event, there is a limit on how far investors can rationally favorably discount the future and therefore how low equity premiums can go. Current claims on a source of income available 20 or 30 years in the future still have current value. But should claims on the hereafter?" I don't read any immediate urgency to lower the rates and therefore I doubt the Feds will do so in next meeting. Perhaps in November, or more likely in December, when US economy will start to show signs of slowdown. If rates are lowered too soon, it can worsen the impact to US economy many months down the road. Worry now about the deflation, and worry later about inflation. Presently, the Feds has the utmost control on the future direction of the economy. Now is the time to control the extent of deflation in order to control upcoming future inflation. That's what US and Europe have learned to do, and which Asia and Latam has yet to learn. Other notes: There will be no concerted efforts to lower rate from Europe. Bundesbank will not lower rates: biz.yahoo.com biz.yahoo.com biz.yahoo.com Troubled economies want lower US rates. Latin America (Latam) wants lower US rates: biz.yahoo.com biz.yahoo.com Many times in the past, Greenspan has warned of the excessive valuation (i.e. expectations) in the market. IMO, many individual stocks are still at ridiculously high levels of expectation and are looking at projected earnings 20 years down the road. Therefore, the market has to go more to the downside.