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To: ANANT who wrote (244)	9/5/1998 5:38:00 AM
From: ANANT	Respond to of 395

Moody's Places China, Hong Kong Ratings on Review for Downgrade Associated Press SHANGHAI, China -- Moody's Investors Service Inc. will review the credit ratings of China and Hong Kong for a possible downgrade because of Chinese export weakness and worries about Hong Kong's financial markets. The credit-rating agency also said Friday it was considering downgrading the ratings of four major Chinese state-owned banks. A downgrade could raise the cost of borrowing for the Chinese government and banks and make foreign investors more reluctant to put money into a country where many already are unhappy with low profits. Even though the former British colony of Hong Kong maintains its own currency, China's difficulties are also being considered as part of the territory's review because of its extensive trade ties with the mainland. While China has avoided a direct hit from the economic turmoil sweeping Asia, its own problems are increasing, a point noted by Moody's. "Today's action was prompted by mounting pressures on China's external position from export weakness and declining foreign direct investment, both of which are important sources of economic growth in China," Moody's said in a statement issued in New York. Nevertheless, a top official insisted Wednesday that China would meet growth targets of 8% this year. Liu Hong, director-general of the State Statistics Bureau, said in Washington that policies meant to increase domestic demand and infrastructure spending should compensate for lower exports, the official China Daily newspaper reported. On Monday, Moody's reduced credit ratings for major Chinese state-owned investment companies, including the Chinese Cabinet's flagship China International Trust and Investment Corp. The ratings service said it believed they were receiving less government support. Moody's said the outlook for Hong Kong was hurt by concern that the Chinese yuan currency would be devalued. China has repeatedly promised not to devalue the yuan, but Moody's said it was looking closely at how concern over that possibility has affected Hong Kong financial markets. Hong Kong has tied the value of its own currency to the U.S. dollar for a decade. It has held that rate steady over recent months, which has taken a toll on local industry by making the territory far more costly than other places in Asia to do business. Efforts by the territory's de facto central bank to maintain the dollar peg by intervening in currency markets has also resulted in a "significant drop" in Hong Kong's reserves, the agency said. "Interventions in the future could weaken the foreign asset position further," Moody's said. Late last year, Moody's downgraded the country debt ratings for several Asian nations hardest hit by the region's financial crisis -- Indonesia, Malaysia, South Korea and Thailand. The agency cited currency devaluations, outflow of funds and financial sector difficulties in those countries when it made the downgrades. ------------------------------------------

To: ANANT who wrote (244)	9/5/1998 5:52:00 AM
From: ANANT	Respond to of 395

NY Times article --- Sep. 5,98 Greenspan Hints That a Rate Cut Isn't Unthinkable By DAVID E. SANGER with RICHARD W. STEVENSON AN FRANCISCO -- Alan Greenspan, the Federal Reserve chairman, signaled Friday that the central bank is now less concerned about inflation as a threat to the U.S. economy but is increasingly wary that the spreading global financial crisis could harm the United States. Greenspan's comments seemed to open the door to consideration of an interest rate cut if the global financial situation continued to deteriorate or if the U.S. economy showed signs of stalling. Greenspan's comments at the University of California at Berkeley came just minutes before Treasury Secretary Robert Rubin met here with Japan's new finance minister, Kiichi Miyazawa, to hammer home the message that the best hope of halting the international crisis lies in quick action by Tokyo to stimulate its economy and shore up its financial system. But with market volatility having spread to Latin America and with Russia veering toward economic collapse, U.S. officials said they feared that it would be increasingly difficult to contain the turmoil. At the end of a week in which Wall Street experienced a sharp sell off, Greenspan said that even the United States was increasingly vulnerable. "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," he said. The current state of the economy was reflected in Friday's August employment report, which showed that payrolls grew by 365,000 jobs. Greenspan stopped well short of suggesting that the Federal Reserve will cut interest rates, a step being urged on him by a growing chorus of economists and officials in other countries. An interest-rate reduction in the United States would help reduce borrowing costs around the world and could be a powerful psychological boost to embattled investors at home and abroad. But Greenspan's comments were a marked departure from his last major policy statement, in July, when he told Congress that the risks of inflation outweighed the possibility that the global financial turmoil could push the otherwise strong U.S. economy into recession. The global turmoil that has robbed countries of prosperity and growth has benefited the United States so far by helping to dampen inflation and slow down an economy that was at risk of overheating, Greenspan said in his speech Friday night. The downward pressure on inflation is likely to intensify as the turmoil in other nations mounts, a development that he said led Federal Reserve policy-makers to rethink their strategy at their last meeting on Aug. 18. "In the spring and early summer, the Federal Open Market Committee was concerned that a rise in inflation was the primary threat to the continued expansion of the economy," he said. "By the time of the committee's August meeting, the risks had become balanced, and the committee will need to consider carefully the potential ramifications of ongoing developments since that meeting." Greenspan's wording indicated that the committee had abandoned its formal policy of leaning toward an interest rate increase in favor of a neutral stance that favors neither a rate increase nor a cut. The Fed's next policy meeting is Sept. 29. Greenspan went on to suggest that the Fed would not rush into a decision about reducing rates just because of this week's slide in stocks. "We have relearned in recent weeks that just as a bull stock market feels unending and secure as an economy and stock market move forward, so it can feel when markets contract that recovery is inconceivable," he said. "Both, of course, are wrong. But because of the difficulty imagining a turnabout when such emotions take hold, periods of euphoria or distress tend to feed on themselves." Greenspan, who has been warning investors for nearly two years that stock prices were higher than reasonable expectations of earnings growth would justify, did not say whether he thought stocks were now more fairly valued after this week's tumble on Wall Street. But he said the 13 percent annual growth in earnings projected by analysts "is unlikely to materialize." Greenspan joined with Rubin after his speech in meeting with Miyazawa. Earlier this week in Moscow, President Clinton termed the meeting with Miyazawa, who served as Japan's prime minister for two years until a surprise fracturing of the ruling Liberal Democratic Party in 1993, as "profoundly important." That statement reflected a growing view in the administration that the best hope of choking off the 14-month old Asian crisis is to bring about a long-overdue turnaround in Japan. But Treasury officials winced at Clinton's characterization because they fear that Japan is still weeks or months away from decisive action, at a time that markets are fraying around the world. All the early indications from Tokyo were that Miyazawa was arriving in San Francisco with few new ideas, no new plans and only vague promises. "This meeting was never designed or intended to address the question of a plan," Rubin said Friday on a flight to San Francisco. "We'll be extremely interested in Miyazawa's discussion of the banking system and fiscal policy." The main reason Rubin and his aides were seeking to play down expectations was their fear that the world's jittery markets could react badly to news of little progress from the meeting. But it is also in part because Rubin and Deputy Treasury Secretary Lawrence Summers have relatively little leverage: Their explicit criticisms of Japan in recent months have created a backlash in Tokyo, and the Japanese Parliament is spinning its wheels as the ruling and opposition parties argue with each other over what to do about the insolvency of some of the world's largest banks. "I don't think we will propose anything new," a senior Japanese official said before the meeting. "It is just that for the first time we have a finance minister who can explain what our government is doing." The official was referring to Miyazawa's greatest attribute as an international diplomat: He speaks fluent English, learned during extensive travels in the United States before World War II, and for half a century he has been cast into crisis situations and negotiations with the United States. But in this case, he has relatively little to work with. Japan's Parliament has been talking for months about passing legislation that would address the country's deepening banking crisis. But the debate has just begun, and it has been bogged down by the question of whether billions of dollars in public funds should be used to bail out banks that were so wildly mismanaged that they now have upwards of a trillion dollars in bad loans on their books. The test case is how the government deals with the Long-Term Credit Bank of Japan, or LTCB, one of the country's largest financial institutions. There is movement in Tokyo toward steps that would essentially nationalize the bank, using taxpayer dollars to rebuild its capital. U.S. officials clearly fear, however, that Japan is not ready to accept the pain of closing the weakest institutions -- and will further delay resolving the bad debts that are freezing the Japanese economy.

To: ANANT who wrote (244)	9/5/1998 6:13:00 AM
From: ANANT	Respond to of 395

Fed Concerned About Global Crisis --- NY Times Sep 4,98 -------------------------------------------------------------------------------- A.P. INDEXES: TOP STORIES \| NEWS \| SPORTS \| BUSINESS \| TECHNOLOGY \| ENTERTAINMENT -------------------------------------------------------------------------------- Filed at 9:46 p.m. EDT By The Associated Press SAN FRANCISCO (AP) -- Federal Reserve Chairman Alan Greenspan said Friday that central bankers are growing more concerned about the global financial crisis' impact on the U.S. economy and are just as likely to cut interest rates as raise them. ''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,'' Greenspan said in a speech Friday at the University of California, Berkeley. In the spring and early summer, Federal Reserve policymakers had been more concerned about the threat of renewed inflation in the United States, Greenspan said. At their meetings during this period, they adopted a policy stance signaling they stood ready to raise interest rates at the first sign of significant inflation. But Greenspan suggested in Friday's speech that the same policymakers at their August meeting decided that the global turmoil posed a growing threat to U.S. prosperity -- and are now just as likely to vote to cut interest rates. ''By the time of the (Federal Open Market) Committee's August meeting, the risks had become balanced,'' Greenspan said, and he went on to hint that the central bank could move from a neutral stance to a policy leaning toward a rate cut, if the global crisis' impact becomes more severe. The Fed's benchmark federal funds rate, the interest that banks charge each other, has been at 5.5 percent since March 1997. That rate determines the borrowing costs that millions of Americans pay on home equity and other loans. ''The Fed is now leaning away from a tightening move, and pointing eventually toward the easing side, depending on how serious this crisis is,'' said David Jones, chief economist at Aubrey G. Lanston & Co. in New York. Greenspan, who in a famous speech in December 1996 warned of ''irrational exuberance'' overtaking the high-flying U.S. stock market, also sought to calm investors who this week watched the Dow Jones industrial average drop 411 points. ''We have relearned in recent weeks that just as a bull stock market feels unending and secure ... so it can feel when markets contract that recovery is inconceivable,'' Greenspan said. ''Both, of course, are wrong.'' But Greenspan also said securities analysts' recent projected per-share earnings growth of more than 13 percent annually over the next three to five years for U.S. companies ''is unlikely to materialize.'' Greenspan was meeting later Friday with U.S. Treasury Secretary Robert Rubin and Japan's new finance minister to review Japan's efforts to pull itself out of recession. The economic crisis that began a year ago in Asia has in recent weeks claimed another victim -- Russia, which has seen its economy disintegrate after a botched attempt to devalue the ruble. And this week, the ripples have reached closer to the United States, as a number of Latin American markets have plunged. Before the recent market turbulence, many U.S. economists had believed the Federal Reserve was poised to raise interest rates soon, because of worries that low unemployment was putting upward pressure on wages and thus could cause inflation. But for the first six months this year, the consumer price index has risen at an annual rate of only 1.4 percent and Fed policymakers voted to leave interest rates unchanged at the central bank's most recent meeting on Aug. 18. The minutes of the July meeting showed that the central bank at that time was still poised to raise short-term interest rates. Officials then saw only a ''very small but growing possibility'' that Asia's problems would trigger a U.S. economic downturn. As market turbulence intensified in the United States this week, a growing number of economists had suggested that the Federal Reserve would soon ride to the rescue by cutting U.S. interest rates. Lower interest rates generally boost an economy's prospects for growth by making it cheaper for businesses and consumers to borrow. Lower U.S. interest rates also could boost the global economy by improving U.S. growth prospects and also lowering the value of the dollar in relation to other countries' currencies. The would make it easier for foreigners to purchase American-made products and services.

To: ANANT who wrote (244)	9/5/1998 6:24:00 AM
From: ANANT	Respond to of 395

Gates Won't Testify for Microsoft -------------------------------------------------------------------------------- A.P. INDEXES: TOP STORIES \| NEWS \| SPORTS \| BUSINESS \| TECHNOLOGY \| ENTERTAINMENT -------------------------------------------------------------------------------- Filed at 1:25 a.m. EDT By The Associated Press WASHINGTON (AP) -- Bill Gates, the chairman of Microsoft Corp. and a controversial leader of the computer age, will leave it to others to testify in defense of his company at its antitrust trial later this month. Eight Microsoft executives, but not Gates, will appear in federal court to dispute the government's claim that the company acted illegally toward industry rivals to preserve the profitable role of its Windows operating system. ''Bill is a visionary for this company and the overall leader, but these people on our witness list were there handling the day-to-day operations,'' company spokesman Jim Cullinan said Friday. The presiding judge also will weigh testimony by executives from some of the nation's leading high-tech companies, who will appear on behalf of the Justice Department and 20 states suing Microsoft. The case is widely viewed as among the most important antitrust actions this century. The government and the company on Friday each identified their dozen witnesses allowed for the trial, a list that offers an important glimpse into possible legal strategies. The roster of companies willing to align themselves against Microsoft -- including Intel Corp., IBM Corp. and America Online -- also suggests the level of fear and resentment directed at the influential software company, even among some of the industry's most powerful players. Also testifying for Microsoft will be John Rose, a vice president for the world's largest computer maker, Compaq Computer Corp. Compaq, a long-time ally of Microsoft, is expected to dispute arguments that Microsoft sought to pressure computer makers to carry its own Internet browser over one made by rival Netscape Communications Corp. The government contends that Microsoft feared that, as the Internet grew in popularity and in its ability to serve as a platform to run software programs, Netscape's Internet browser posed a threat to its Windows dominance. The witness names offered few surprises, except for one person listed for the government: Scott Vesey, an executive of The Boeing Co. who reportedly works at the company's computer offices in Bellevue, Wash., close to Microsoft's headquarters in nearby Redmond. Neither Vesey nor Boeing have previously surfaced in the case. ''Boeing is a customer of ours,'' Cullinan said. ''I don't know what the exact issue is, but they're a customer.'' The Justice Department declined to comment further on its list. Robert Litan, a former senior Justice Department official who has been following the case, said Microsoft's decision not to use Gates surprised him as much as the government's mysterious decision regarding Boeing. The government recently took a deposition from Gates over three days at his corporate offices, but it complained in court documents that he ''displayed a particular failure of recollection at his deposition.'' Several times in its lawsuit, the government quoted excerpts of e-mail from Gates to try to illustrate that he had acted illegally toward rivals, especially Netscape, whose popular browser competes directly with Microsoft's. Netscape's chairman, James Barksdale, leads the government's witness list. In one e-mail, Gates is quoted as saying he was ''quite frank'' with Intuit founder Scott Cook ''that if he had a favor we could do for him that would cost us something like $1 (million), to do that in return for switching browsers in the next few months.'' Intuit makes the popular Quicken personal finance software and had been a supporter of Netscape until a business agreement with Microsoft. The government listed its chairman, William Harris, as one of its witnesses. Microsoft has accused the government of mischaracterizing e-mails from employees as policies approved by its highest executives. ''Their defense to the bad e-mails (was) that this was office chatter and wasn't approved by the guy at the top,'' said Litan, now an economist at the Brookings Institution. ''One would have assumed they would offer the guy at the top.'' U.S. District Judge Thomas Penfield Jackson decided in June to limit the number of witnesses who can testify, in an attempt to keep the trial from bogging down. It's already expected to last weeks. The judge limited each side to six to 12 witnesses, but he agreed to allow additional people, ''if good cause is shown.'' --------------------------------

To: ANANT who wrote (244)	9/5/1998 6:34:00 AM
From: ANANT	Respond to of 395

List of Witnesses in Microsoft Case - NY Times Sep 5,98 -------------------------------------------------------------------------------- A.P. INDEXES: TOP STORIES \| NEWS \| SPORTS \| BUSINESS \| TECHNOLOGY \| ENTERTAINMENT -------------------------------------------------------------------------------- Filed at 1:26 a.m. EDT By The Associated Press WASHINGTON (AP) -- People who will testify in the government's upcoming antitrust case against Microsoft, scheduled to begin later this month: For Microsoft: --Paul Maritz, a Microsoft vice president who the government contends helped decide to bundle the company's Internet browser within Windows and who allegedly worked to persuade America Online and CompuServe to distribute Microsoft's browser but not Netscape's. The government also contends Maritz was partly behind efforts to ''blunt'' the Java programming language, which Microsoft reportedly saw as a threat to its Windows software. --James Allchin, a Microsoft vice president in charge of Windows 98, who the government said wrote in a potentially incriminating e-mail that the company should begin ''leveraging Windows from a marketing perspective.'' Maritz was Allchin's boss. --Joachim Kempin, a Microsoft vice president in charge of its contracts with computer makers. --Brad Chase, another Microsoft vice president. The government said Chase warned in an internal April 1997 memo that Internet browsers could ''obsolete Windows.'' --Yusuf Medhi, the company's Windows marketing director. --Cameron Myhrvold, vice president of Microsoft's Internet Customer Unit and the brother of the company's chief technology officer, Nathan Myhrvold. Cameron Myhrvold was in charge of dealing with Internet Service Providers, which distribute Internet browsers to their online customers. He told government lawyers in April those Internet companies and computer makers are ''the two most important channels'' for distributing browsers. --William Poole, Microsoft's senior director for Windows Business Development. --Daniel Rosen, Microsoft's general manager for new technology. --John Rose, senior vice president at Compaq Computer. --Richard Schmalansee, interim dean of the Sloan School of Management at MIT; one of the nation's top economists; a former member of the Council of Economic Advisers during the Bush administration. He worked with Microsoft during the last Justice Department investigation that ended in a 1995 consent decree. --Michael Dertouzos, director of MIT's computer lab, an expert in computer science. --Michael Devlin, president of Rational Software Corp., a small California company with a long business relationship with Microsoft. For the government: --James Barksdale, president and chairman of Netscape, which makes the popular Internet browser that competes directly with Microsoft's. Former executive with AT&T and McCaw Cellular Communications. --David Colburn, senior vice president of business affairs at America Online, which agreed to distribute Microsoft's browser to its 13 million customers. --Steven D. McGeady, vice president of Intel Corp.'s content group, who led some of the company's software development efforts and its work with the Internet and with Java. The government contends Microsoft tried to dissuade Intel from software development because it saw it as a risk to Windows. --John Soyring of IBM Corp., which makes computers with the Windows operating software installed. --William Harris, president and chairman of Intuit, which makes personal finance software. In the past two years, he was chiefly responsible for the company's Internet activities. Also a former vice president at U.S. News and World Report. --Scott Vesey of the Boeing Co., who reportedly works in its computer division in Bellevue, Wash. --Franklin Fisher, an MIT economics professor; a nationally known economics expert described as ''Justice's star witness.'' Fisher was IBM's economics expert during its lengthy fight with the Justice Department decades ago, when he worked with IBM lawyer David Boies, who is now leading the government's case. ''Fisher is one of the heaviest heavyweights you can bring out, one of the leading economists in the world,'' said Robert Litan, an economist with the Brookings Institution. --Frederick R. Warren-Bolton, another well-known economist. Former chief economist during the Reagan administration; has worked in the high-tech area. --David J. Farber, telecommunications professor at the University of Pennsylvania. --Edward Felten, assistant computer professor at Princeton University. --Glenn Weadock, president of Independent Software Inc. --David Sibley, economics professor at the University of Texas, who specializes in public utilities. --------------------------------------------------------------------------------

To: ANANT who wrote (244)	9/5/1998 6:45:00 AM
From: ANANT	Respond to of 395

Japan Offers No Solution To Crisis - NY Times - Sep 5,98 -------------------------------------------------------------------------------- A.P. INDEXES: TOP STORIES \| NEWS \| SPORTS \| BUSINESS \| TECHNOLOGY \| ENTERTAINMENT -------------------------------------------------------------------------------- Filed at 4:34 a.m. EDT By The Associated Press SAN FRANCISCO (AP) -- The Japanese may not have offered new answers to a deepening global financial crisis, but Federal Reserve Chairman Alan Greenspan said the world's most powerful central bank was growing concerned enough to consider cutting U.S. interest rates. A meeting Friday between Treasury Secretary Robert Rubin and new Japanese Finance Minister Kiichi Miyazawa had been billed as a showdown. At issue, as President Clinton put it this week, was the need for a ''profoundly important'' discussion about Japan more aggressively shoring up its economy. The talks, however, essentially covered well-worn territory, both sides said: Japan insisted it was moving as fast as it could to jump-start an economy mired in the worst recession in 50 years; U.S. officials complained that Japan needed to act more boldly to spur growth for its troubled Asian neighbors. Stealing the show was Greenspan, who joined Rubin and Miyazawa for dinner after a speech in Oakland. Analysts said Greenspan's remarks provided a clear signal the Fed stood ready to cut interest rates to ensure that the U.S. economy is not dragged into a recession. ''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,'' Greenspan said. ''As dislocations abroad mount, feeding back on our financial markets, restraint is likely to intensify.'' Greenspan noted that in the spring and the early summer, Fed policy-makers still were more worried about the risk that inflation could get out of hand and were poised to raise interest rates to slow U.S. growth. The most recent turmoil has convinced those policy-makers that the risks of inflation and recession had ''become balanced,'' Greenspan said. The Fed would ''need to consider carefully'' the potential threats of the deepening global economic troubles, he added. Analysts viewed Greenspan's language as a clear indication the Fed's new worry is a U.S. economy slowed too much by Asia. That would represent a change from Greenspan's mid-year report to Congress just six weeks ago. Then, he indicated that a bigger risk was inflation from too-tight labor markets. ''The comments he made were very significant in terms of signaling a major change in monetary policy,'' said Lynn Reaser, economist with Nationsbank Corp. in Jacksonville, Fla. David Jones, economist at Aubrey G. Lanston & Co. in New York agreed. But he said it was unlikely the Fed would cut rates at its next interest-rate meeting on Sept. 29. Jones expected the Fed would see whether U.S. financial markets settle down and how much of a drag a sharply rising trade deficit becomes on the overall economy. The Fed has not changed interest rate policy since March 1997. Its federal funds rate, the benchmark for millions of Americans' short-term borrowing costs, has remained at 5.5 percent. Greenspan's comments were likely to provide solace to financial markets disappointed that Miyazawa did not present more concrete details on how the government of new Prime Minister Keizo Obuchi plans to shore up its shaky banking system and revive the economy. ''It is important for Japan to move,'' Rubin told reporters after the discussions. ''The world needs Japan to get back on track.'' Rubin hoped the talks had provided some momentum to Japan's efforts. He also noted that Clinton and Obuchi will meet in two weeks in New York, apparently in an effort to lay down another marker when the United States will be judging Japan's commitment to economic reform. Both the San Francisco meeting -- and Greenspan's speech -- followed a harrowing week for global markets. Russia's economy appeared to be in a free-fall after a botched devaluation of the ruble and the government's unilateral declaration it was delaying payments on billions of dollars in foreign loans. That sent investors scurrying for the exits in other emerging markets. Markets across Latin America took steep dives Friday, despite a special International Monetary Fund meeting in Washington of finance ministers of nine of the largest Latin American economies. The meeting was intended to show the ministers' resolve to withstand the global turmoil. --------------------------------------------------------------------------------

To: ANANT who wrote (244)	9/5/1998 7:00:00 AM
From: ANANT	Respond to of 395

Court Bars Bells From Offering Long Distance -- NY Times nytimes.com Excerpts: In a split decision, a panel of the United States Court of Appeals for the Fifth Circuit restored the cornerstone of the Telecommunications Act of 1996. That provision requires the Bells to convince Federal regulators that they have opened their local networks to potential competitors before they are allowed into the long-distance market. No Bell has yet passed that test. Friday's ruling, issued after major financial markets closed, handed an important victory to the big long-distance carriers in their regulatory struggle against the Bells. The Bells, which dominate the $100 billion local telephone business, are trying to get into the long-distance market while the existing long-distance carriers, including the AT&T Corporation, are trying to keep the Bells out.

To: ANANT who wrote (244)	9/5/1998 9:18:00 AM
From: ANANT	Read Replies (1) \| Respond to of 395

Articles for review: Barrons: September 7, 1998 Boxing a Bear All-out collapse looks unlikely, but so does a rousing rally By Jacqueline Doherty interactive.wsj.com Excerpts: Yet the domestic economy does have some sweet spots. Consumers remain confident and keep shopping till they drop. Inflation is under control, and the yields on long-term Treasury bonds have fallen to the lowest levels in a generation. Such cross-currents have analysts split: Bulls believe lower interest rates will save the day. Bears predict that creeping global deflation will overwhelm any benefits of those lower rates. "If the meltdown occurs it's going to be because of deflation," opines Greg Jensen, a research associate at Bridgewater Associates. "The power of the deflationary force in the world right now is stronger than anything we've seen since the Great Depression." The excess industrial capacity around the world and the plunge in commodity prices have surprised most market watchers. Right now, in the U.S. there is a delicate balance between the negative impact of deflation and the positive impact of low interest rates on corporate profits. But if deflationary pressures eventually overpower the influence of lower interest rates, the market could face more trouble, explains Jensen. One key indication that deflation may be winning the day is the breakdown in the correlation between stock prices and bond yields. Normally, when bond yields fall, stock prices rise. It's easy to -------------------------------- ÿ Cracks in The Nifties Two long-time tech bears size up the flight to "quality" By Kathryn M. Welling interactive.wsj.com IMHO: This article is bearish. represents another point of view.