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

To: Ramsey Su who wrote (6632)	9/23/1998 9:12:00 PM
From: Lee Lichterman III	Read Replies (2) \| Respond to of 9980

I have been a long time lurker but had to pipe up to this. I think the total opposite is required. He should not lower rates!!! We have to draw the line somewhere in this market before the bubble gets totally out of hand (as if it isn't already). Where do we stop, average PE of 100, 1000, 10000, a million. If making joe blow feel rich is a cure then what about all the other people that don't invest. There are only 40% of US population in the market and less than 30% have more than 5K invested. We need to force the other countries to get their affairs in order and we need to keep rates where they are so more foreign money doesn't flow into our market. I guess we'll see what happens Tuesday. Good luck all on one of the best threads at SI, Lee

To: Ramsey Su who wrote (6632)	9/23/1998 11:12:00 PM
From: Zeev Hed	Read Replies (3) \| Respond to of 9980

Ramsey, I do not think that Greenspan is going to rush to lower rate (we'll see next week <G>). The problem of the world are due to excessive capacity in an environment where the major engine of growth in demand has been halted in its track. AG will lower our rates to stop a financial meltdown if it were to occur, but right now, I think he views the domestic situation as a "healthy retrenchment", or the soft landing he has always sought (and gotten quite often). Unless our unemployment rate seriously breaches 5%, or we actually experience two or maybe three consecutive months of declining leading economic indicators, he'll stand pat, IMHO. If he uses the rate reduction weapon now, he positions the US as the "sole" engine of excess capacity soaking, and both AG and the administration would want to see Japan instituting a policy of increased domestic demand in Japan to soak some of the excess capacity in the far east. If the Dow breached 7200 and dropped to the mid 6000, then he might start and think about giving a signal that enough is enough and lower rates. Right now, the bond market lowered the rates for him and he need not move with Fed rates and overnight rates. I think he is afraid to use lowering interest rates prematurely so as not to get caught in a liquidity trap as Japan had been. He is leaving himself ample room to act (I would say that with current inflation even 4% would still be a high net interest rate) very gradually. The last thing Greenspan wants to see is the DOW back above 9000, and a strong easing signal may cause just such an explosion. Many are urging AG to lower rates, but such rate lowering here will not have any positive impact on the crisis in Asia, Russia and the nascent crisis developing in South America and even Canada. Zeev

To: Ramsey Su who wrote (6632)	9/24/1998 11:53:00 AM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 9980

Ramsey, I don't think Greenspan has been months behind at all. In various comments he has outlined what he believes needs to be done to address the structural reforms required in the emerging markets. But at the end of the day he has no authority to present those as the views of the The US government, that is the Treasury's job. All he controls is monetary policy and it is arguable wether he should have cut rates before now. Also he has to be very careful how he expresses himself in public. We have both seen how the market hangs on his every word. If he had made more alarming or forceful comments on the situation before there was any a consensus among policy makers he would risk creating a panic. FWIW I don't think there is a major risk of a significant recession in the US. A slowdown yes, and that in and of itself is enough concern for the emerging markets. A rate cut of the magnitude you are suggesting would be, imo, disastorous as it would cause an even worse asset bubble. That ones deflation would be even more damaging. Henry