Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: chirodoc who wrote (7570)	9/5/1998 3:36:00 PM
From: Steve Fancy	Respond to of 22640

Greenspan Indicates Fed Dropped Bias Toward Tightening at August Meeting Dow Jones Newswires WASHINGTON -- Federal Reserve Board Chairman Alan Greenspan all but confirmed that the central bank abandoned its bias toward tightening at its last policy-setting meeting and admonished fellow central bankers to weigh carefully the ramifications of recent financial market turmoil. In a speech Friday at the University of California at Berkeley, Mr. Greenspan suggested that the U.S. can't escape the turmoil and pressures of the international marketplace "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," Mr. Greenspan said. "Developments overseas have contributed to holding down prices and aggregate demand in the United States in the face of strong domestic spending. As dislocations abroad mount, feeding back on our financial markets, restraint is likely to intensify," Mr. Greenspan said. In his most explicit reference to the Federal Open Market Committee's deliberations, Mr. Greenspan indicated that the FOMC abandoned its bias toward tightening at its most recent session. The minutes from that meeting have not yet been made available. "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," Mr. Greenspan 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." While indicating that pressures on the economy were "balanced," Mr. Greenspan restated the need for vigilance on inflation. "To be sure, labor markets are unusually tight, and we should remain concerned that pressures in these markets could spill over to costs and prices. But to date, they have not." Mr. Greenspan raised several questions about the rationality of assumptions of securities analysts, and thereby indirectly questioned the level of stock prices based on such assumptions. "Security analysts' recent projected per-share earnings growth of more than 13% over the next three to five years is unlikely to materialize," Mr. Greenspan said. "It would imply an ever increasing share of profit in the national income from a level that is already high by historic standards," Mr. Greenspan said. "Such conditions have led in the past to labor market pressures that thwarted further profit growth." Mr. Greenspan restated a quip in which he chided markets for looking for earnings too far into the future, even in an atmosphere of near price stability and reduced threat of inflation. "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?" Mr. Greenspan asked. High equity market values relative to income and production also increase potential for economic swings and should give people reason for "caution," Mr. Greenspan said. "Since equity values are demonstrably more variable than incomes, when equity market values become large relative to incomes and GDP, their fluctuations can be expected to affect GDP more than when equity market values are low," Mr. Greenspan said. "Clearly, the history of large swings in investor confidence and equity premiums for rational and other reasons counsels caution in the current context," Mr. Greenspan said. "We have learned 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. Both, of course, are wrong," Mr. Greenspan said. "The immediate cause of the economic breakdown [in Asia] was an evident pulling back from future commitments" where the emergence of excess worldwide capacity in semiconductors may have been a triggering event, he said. "The process became self-feeding as disengagement from future commitments led to still greater disruption and uncertainty, rising risk premiums and discount factors, and a sharp fall in production," Mr. Greenspan said. In contrast, expectations played a generally more positive role in the U.S. where "the rise in stock prices also meant a fall in the equity cost of capital that doubtless raised the pace of new capital investment," Mr. Greenspan said. Higher stock prices also reduced the cost of capital. "Coupled with the quickened pace of productivity growth, wage and benefit moderation has kept growth in unit labor costs subdued in the current expansion. this has both damped inflation and allowed profit margins to reach high levels," Mr. Greenspan said. But even virtues can become a vice, he noted. Japan has had savings and investment rates far higher than those in the U.S., but its per capita growth potential now "appears to be falling relative to ours," he said. "This phenomenon of over investment is observable even among more sophisticated free market economies .... It is arguable that their hobbled financial system is, at least in part, a contributor to their economies' subnormal performance," he said.

To: chirodoc who wrote (7570)	9/5/1998 3:39:00 PM
From: Steve Fancy	Respond to of 22640

Hong Kong Introduces Measures To Curb Currency Speculation Dow Jones Newswires HONG KONG -- The Hong Kong Monetary Authority introduced technical measures Saturday to protect its financial markets from currency speculation, ending a week that began with the local stock and futures exchanges fencing in speculators. The measures, which HKMA Chief Executive Joseph Yam described as a means of "purifying" Hong Kong's 15-year-old modified currency board, are intended to ease interest rate volatility and raise costs for speculators trying to break the peg. The measures come in the wake of some of the worst market speculation in Hong Kong's recent history. In August, hedge funds sold the currency and stock futures short to make money and perhaps strain the peg. The speculation caused the Hong Kong stock market to plummet. Saying speculators were manipulating markets and maybe even causing them to overshoot, the government made its first interventions into the stock and futures market, spending as much as US$15 billion, according to some analysts, to shore up falling share prices and squeeze speculators out of the futures markets. In the wake of speculation, the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange and the Hong Kong Securities Clearing Co. this week rolled out preventive measures, such as short-selling restrictions, higher margin requirements and a reminder that all securities transactions would need to be settled two days after execution. It was the HKMA's turn Saturday, with Mr. Yam guaranteeing all licensed banks the quasi-central bank would convert U.S. dollars in their clearing accounts at a rate of HK$7.75 per dollar from the open of business Monday. That liquidity guarantee should remove an uncertainty banks have about finding Hong Kong dollar funding, which has made them reluctant to lend to each other, except at very high rates. In setting the conversion rate at HK$7.75, the HKMA acknowledged for the first time that it considers that level its "intervention rate," something market participants have long believed. Other changes to the discount window involve repurchase agreements, which will require speculators to ante up more money than they did before if they want to strain the peg. From Monday, the HKMA will remove the punitive rates and "repeated borrower" designation. It will allow unlimited usage of the discount window, but at the same time, it will restrict repurchase agreements to holders of its Exchange Fund bills and notes or paper issued by the government-backed Hong Kong Mortgage Corp., the Mass Transit Railway Corp. and the Airport Authority. Mr. Yam acknowledged the restriction of discount window eligibility to Exchange Fund paper would somewhat stunt the development of the Hong Kong dollar bond market, as well the requirement that paper issuance be fully backed by reserves. Hong Kong's reserves were at HK$96.5 billion at the end of July, but they are expected to be sharply lower after the government bought blue-chip stocks and stock futures heavily in August.

To: chirodoc who wrote (7570)	9/5/1998 3:42:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

High-Level Talks on Global Crisis End With No Commitment From Japanese Dow Jones Newswires SAN FRANCISCO -- A meeting of top U.S. and Japanese officials that President Clinton billed as "profoundly important" to the world economy ended without concrete results Friday as Japan said domestic politics prevent it from quickly jump starting its economy. U.S. Treasury Secretary Robert Rubin met Japanese Finance Minister Kiichi Miyazawa, who said he understood the urgency for banking reforms and a fiscal stimulus in his country. But Mr. Miyazawa made no pledge beyond what Japan has already announced -- that it will take "all possible steps to promote financial stability." At a press conference after the meeting, Mr. Rubin said he was hopeful that Japan will act quickly, saying it has shown an inclination in the last few months to cut taxes and rescue troubled banks. But he said a judgment about Japan's commitment to reform can only be made "once Japan acts." But Mr. Miyazawa's response was lukewarm. The Japanese finance minister said that political compromise between Japan's ruling Liberal Democratic Party and opposition parties will be necessary for Japan's banking reforms to be enacted successfully. He didn't offer any concrete schedule for the passage of plans. Mr. Miyazawa said that Japan would ensure the country's major banks don't fail so that the global banking system won't be disrupted. "The Japanese government will use public funds to avoid collapse of a big bank" such as the Long-Term Credit Bank of Japan, Mr. Miyazawa said. Concerning the recent rapid decline of the dollar against the Japanese currency, both Messrs. Miyazawa and Rubin said there was 'no discussion on concrete levels of the dollar/yen rates." Mr. Rubin said the U.S. continues to favor a strong dollar. The U.S. hasn't intervened to prop up the yen since June, when it acted in concert with the Japanese monetary authority. Noting that the financial contagion that began in Thailand last year has spread around the globe, Messrs. Rubin and Miyazawa called on the Group of Seven leading industrial nations to 'pursue appropriate policies to promote sound financial systems and strong, sustainable growth." But neither side called for concerted interest-rate cuts, as was suggested Thursday by Rep. Jim Saxton (R., N.J.), chairman of the Joint Economic Committee in the U.S. Congress. Mr. Rubin said Mr. Miyazawa didn't propose concerted rate cuts, and so the subject wasn't discussed. The U.S., for its part, so far sees no need to change monetary policies that have resulted in a combination of robust growth and low inflation. "In our view the fundamentals of the U.S. economy are solid," Mr. Rubin said. "The key is for the U.S. to continue to follow sound policy." The international financial crisis has slowed U.S. growth, he said, but "the probability of a severe crisis that has major effects on the U.S. is low." Messrs. Rubin and Miyazawa are expected to continue an informal discussion over dinner late Friday, but both U.S. and Japanese officials have said they expect no major outcome. Federal Reserve Chairman Alan Greenspan is scheduled to attend the dinner meeting.

To: chirodoc who wrote (7570)	9/5/1998 3:47:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Russian Lawmakers Will Propose New Candidates for Prime Minister Associated Press MOSCOW -- Russian opposition leaders said Saturday they had as many as nine alternatives to Boris Yeltsin's choice for prime minister, including several top Soviet-era bureaucrats. Their remarks kicked off a second weekend of behind-the-scenes negotiations to end a political and financial crisis that has begun to spur anxiety among ordinary Russians worried about further instability. The Communist-dominated parliament unexpectedly postponed hearings Friday on whether to confirm the president's pick for premier, Viktor Chernomyrdin. Party leaders agreed to hold talks with Mr. Yeltsin on Monday before a rescheduled debate on Mr. Chernomyrdin that day. "I don't expect anything good from Mr. Yeltsin" on Monday, Communist leader Gennady Zyuganov told the Associated Press. "We will state our opinion of the real situation. Because he rarely meets [with lawmakers], he doesn't know the situation. He is not governing," Mr. Zyuganov added. Mr. Zyuganov said he and his hard-line allies have nine possible alternatives to Mr. Chernomyrdin, whom they blame for creating Russia's current economic predicament during the five years he was prime minister before being fired in March. "The Yeltsin-Chernomyrdin couple ... are distrusted by 9 out of 10 people now," Zyuganov said. "By the end of September they will be distrusted by 98 out of 100 people. They have no assets, no resources, no brains, no will ... They have nothing." Mr. Yeltsin brought Mr. Chernomyrdin back to head the government on Aug. 23, saying he needed an experienced heavyweight to deal with the country's mounting problems. Mr. Yeltsin has been locked in a standoff with parliament since then, while the economy deteriorates. On Friday, the ruble dropped another 21% and sharp price increases spurred consumer anxiety. "I started to get worried today for the first time," said one shopper, retired theater director Nina Vasilyeva. "The idea of stocking up hadn't even come into my head before. But groceries are now twice as expensive. I'm buying things I don't need because everybody's bought the rest." The official ruble rate fell Friday to 16.9 to the dollar, or 5.8 cents, down from 13.4 to the dollar, or 7.4 cents, on Thursday. The street rate was even lower. The leader of the Communist-allied Agrarian Party said the alternative candidates for prime minister include Vladimir Gerashchenko, whose favorite response to economic problems as Central Bank chairman in the Soviet era was to print more money, and Yuri Maslyukov, former head of the Soviet state planning agency. Agrarian leader Nikolai Kharitonov said they would also suggest Moscow Mayor Yuri Luzhkov; Yegor Stroyev, speaker of the Federation Council, the upper house of parliament; and Gennady Kulik, deputy chairman of the parliamentary budget committee, the Interfax news agency reported. The opposition considered proposing Mr. Zyuganov as well, Interfax said. "I decided not to name Zyuganov because this name gives the president heartburn," Mr. Kharitonov said. Mr. Zyuganov came in second to Mr. Yeltsin in the 1996 presidential elections. Mr. Yeltsin has said he will nominate no one other than Mr. Chernomyrdin. Under the constitution, Mr. Yeltsin has three chances to propose a prime ministerial candidate, either the same person or different people. If the Duma, the lower chamber of parliament, rejects Mr. Yeltsin's choice three times, the president can disband the legislature and call new elections. Ultranationalist Vladimir Zhirinovsky predicted Saturday that Mr. Chernomyrdin would be confirmed if Monday's vote is a secret one, rather than an open vote. The Communists have called for an open vote, apparently hoping to keep their members from quietly supporting Mr. Chernomyrdin to avoid early elections that they could lose. Mr. Chernomyrdin's position was strengthened Friday when the Federation Council passed a non-binding motion 91-17 expressing confidence in him. The vote was symbolic, but it may increase pressure on the Duma to find a compromise. The regional governors who make up the Council have huge power and the vote signaled they would back Mr. Yeltsin in a showdown. "Viktor Chernomyrdin, if approved for the premiership, will be able to take real steps for taking the country out of the crisis in a short time," said Alexander Lebed, the former national security adviser recently elected governor of the huge Krasnoyarsk region of Siberia.