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To: MythMan who wrote (2660)	9/8/1998 2:07:00 PM
From: SJS	Read Replies (1) \| Respond to of 14427

TALK OF INTEREST RATE CUT. The power of the Federal Reserve is enormous. On Friday after the market closed,Federal Reserve Chairman Greenspan gave a speech in which he hinted that the Fed might reduce short-term interest rates. The dollar subsequently tanked against the yen, and Japanese stocks rose 5% on Monday. World equity markets took off. Sharp gains were recorded Monday while the U.S. took a holiday, and Tuesday has seen further gains. Ahead of the U.S. open, S&P futures are trading 25 points higher, suggesting the Dow might jump 170 points or more. A lowering of short-term rates by the Fed would certainly help stocks, particularly financial stocks. Financial stocks, which have been indiscriminately beaten up, benefit substantially from lower short-term rates and a steeper yield curve. They could take off. However, this is not be something the overall market should get carried away with. After all, the Fed could lower the Federal Funds rate (the rate charged between banks for overnight loans of reserves) from the current target of 5 1/2% to 5% and all that would do is bring it into line with other market interest rates. The 2-year note yields about 5% and the 30-year bond yields 5.3%. Dropping the Funds rate to 5% would simply be reacting to what has already occurred in the market. Nevertheless, the stock market is starved for good news, and this counts. If it indeed happens. The Fed meets on September 29 to set policy, so any announcement might be a while off. Also, such a move is unlikely to produce any further rally in the bond market as those rates have already fallen. So, the benefits of lower interest rates, while tangible, may not be as lasting as past changes in interest rate policy by the Fed. The impact of this talk is helped by the traditional strength in the market after Labor Day. However, Briefing.com cautions against believing this is the start of a large, sustainable rally.

To: MythMan who wrote (2660)	9/8/1998 4:01:00 PM
From: Skeeter Bug	Respond to of 14427

mm, i have way more longs than puts on a money and share basis. a rate cut is dangerous. here is why: 1. it would marginally increase production in near glut environments potentially leading to deflation and big problems. 2. it would potentially weaken the dollar and cause foreigners to dump t-bills and, effectively, raise bond rates. 3. it may provide incentive for loony toon bulls to value zero growth companies at 40 pes - an unsustainable condition that will inevitably lead to a bust scenario. 4. asset inflation (related to 3 but including real estate) is approaching fantasy land. the real estate bulls would also pay much more now than they will receive later for their homes exacerbating any economic negatives. contrary to the bulls' opinion. mr g is not hired and paid by the nyse for the sole purpose to prop your (or mine) investments. and anyway, it isn't what i want. it IS WHAT GREENSPAN SAID. it was obvious and only 4% of america has the ability to understand plain english when it is contrary to their own financial lust.