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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: kahunabear who wrote (28159)	9/17/1998 9:20:00 AM
From: Arik T.G.	Read Replies (1) \| Respond to of 94695

WS, >> I don't see how an interest rate cut by the fed helps anything at this point. This first part of this statement is false. You can see. You do see. Hypers don't. In the land of the blind, the one eyed person shorts too soon. ATG

To: kahunabear who wrote (28159)	9/18/1998 12:55:00 PM
From: James F. Hopkins	Read Replies (2) \| Respond to of 94695

WS; 1 A cut would make more capital available, 2, reduce the cost of margin, 3, & make paying off some debt less expensive. On the other hand it increases speculation, and cuts into the profits already on the books in the bond market. In the junk bond market many high interest bonds are callable, and if short term rates drop companies will borrow short term money and call in many of the bonds they issued at 9 & 10%. Say I have $20K 10% callable notes on xyz & they call them paying me off, now I have to figure out what to do with the money. I liked the notes as the 10% return was nice and risk free ( compared to stocks ) on top of that prior to the call, my notes had an increase in market value due to the falling interest rates in other areas. ---------------- So there is a tug of war, between those who benefit from the higher short term rates, and those who benefit from them going lower. A drop in the rates creates liquid and produces more currency looking for a place to go, and helping some companies reduce long term debt in a way that the effect of paying off debt with cheaper money. Side effects are that it can cause the Dollar to lose value, and runs the risk of creating more inflation. --------------------------- It's a dilemma , and should not exist but it does as the bankers know how to exploit it. The rates are moved when the Big Bankers are positioned to benefit. If for some reason they see to many loans about to default they may reduce rates and take what looks like a loss. However all that is relative. ----------------- Now take people like Buffet, he don't lose sleep over it, he buys what he thinks is good management in companies he has faith will not go broke, knowing that down the road even if the price of the stock falls, ( the cost of eggs also gets cheaper ), ie water will find it's own level regardless of the macro economics. He has a long term plan and can afford a time frame that makes ( control in a company ) the prime principle. Markets can go where they want the price of stock is a relative factor ( a type of currency )that in time will reflect what you can buy with dollars. I suppose he has his own formula for telling when currency is cheaper than stock, or stock cheaper than currency, and he adjust his portfolio some by selling some of one to buy the other in order to take some profits and pay the bills. He does not claim to be a genius and says anyone can do what he did, if they start early enough and have some good habits. Jim