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To: Enigma who wrote (19793)	9/25/1998 9:20:00 PM
From: goldsnow	Respond to of 116764

At least we hope it will be up, certainly after crash if not before :) Rescue spooks the market By Ivor Ries World financial markets are bracing for further big share price falls during the week following the wave of selling that swept the globe on Friday amid mounting anxiety about the size of losses racked up by hedge funds in the United States. Brokers and fund managers say the US stockmarket is set to tumble again as investors seek to minimise their exposure to shares in financial institutions because of fears that the world's banking system is in danger of being hit by domino-style collapses. Investors are still coming to grips with the rescue, co-ordinated by US central bank chief Dr Alan Greenspan, of stricken $US90 billion American hedge fund Long-Term Credit Management. Share prices in Australia and the Asia-Pacific plummeted on Friday after Wall Street's 2.7 per cent plunge on Thursday. The regional share price slide, ranging between 2 and 4 percentage points, wiped an estimated $50 billion off the value of Asia-Pacific markets. In Australia the All Ordinaries fell 1.9 per cent, slicing $9 billion off market value. Although there is no evidence that any Australian bank is exposed to the American hedge fund industry, the losses were heaviest in the financial sector, with the big four banks collectively marked down by $2.1 billion. With the implications of the LTCM bailout sinking in, strategists are predicting a turbulent ride ahead. "There's a credit crisis going on around the world, and it was brought home to us in spades by the bailout," JP Morgan Investment Management managing director Mr Henry Cavanna told Bloomberg on Friday. "All the major banks and brokerages have exposure. We are not out of the woods yet." One senior equity market strategist, speaking anonymously because of his firm's participation in the LTCM bailout, said: "My feeling is that there is a lot more to come. This is the biggest financial crisis this market has seen for a long time." The full extent of LTCM-induced losses on world banks has not yet been spelt out. On Friday the Union Bank of Switzerland revealed that it had lost $US685 million on its exposure to the hedge fund. Other major bank lenders to LTCM have yet to declare the size of their exposure. Fed chairman Dr Greenspan is said to have agreed to co-ordinate the LTCM bailout after he became aware of the potential impact of the hedge fund's failure on the Japanese banking system, which will face several critical tests soon. With just $US3.5 billion in equity provided by wealthy US individuals, LTCM at one stage had borrowed $US125 billion to speculate on global bond, currency and derivate markets. According to analysts, Japanese banks and insurance companies had provided LTCM with much of its debt capital. Like many US hedge funds, LTCM had been taking advantage of record low Japanese interest rates. However, by borrowing in yen to invest in financial assets in other currencies, LTCM was exposed to massive exchange rate risks. If it had defaulted it would have put further pressure on the already shaky Japanese banking system. Although LTCM made massive profits in 1997 and 1998 – reported returns to equity investors were above 40 per cent – everything went wrong for its investment strategy in 1999. Part of LTCM's losses came from punting on Russian bonds. The collapse of the rouble this year wiped out most of the hard currency value of its Russian bond holdings. However, it appears that the majority of LTCM's so far unquantified losses came from a sophisticated arbitrage play on differences between Danish and German bond interest rates. LTCM was betting that Danish bonds would rise in value and that German interest rates would fall. However, the Danish bonds fell and German rates remained high, causing LTCM to incur billion-dollar losses. The strategy behind the LTCM bailout is to avoid triggering a debt deflation cycle, where firesale selling of LTCM's investment positions causes a steep drop in the value of second-tier debt securities around the globe. A firesale of LTCM's positions, coupled with market-to-market accounting policies adopted by global investment banks, would impose severe paper losses on many of the world's major investment banks. Most analysts don't expect the Fed to stop at the LTCM bailout in trying to shore up confidence in the world banking system. Most expect that it will cut official interest rates as early as the coming week. The rate cuts will reduce the cost of funding to banks and improve their balance sheets by bolstering the book value of bond holdings. "We are expecting a series of rate cuts, possibly as high as 50 basis points, from as early as [the coming week]," said HSBC Securities chief strategist Mr Marcus Tuck. "We think there are a number of cuts on the way." • With Bloomberg and wires afr.com.au

To: Enigma who wrote (19793)	9/25/1998 9:28:00 PM
From: bobby beara	Read Replies (5) \| Respond to of 116764

E. I agree with your scenario, i believe the potential crash scenario was averted in mid September. The crash scenario would have asserted itself by then and continued the selling momentum after an ABC bear rally, however this rally has shown big staying power and the tenacity of this bull to hang on. I think it will be a stair step trading range down - though with some big down moves. This kind of bear market is much more abusive (and as a baby boomer and a subject of the Clinton era - don't we need abuse -g-) digisys.net Notice the bollinger bands tightening around the current $USD trading range. I believe that when they constrict to a point we will have a mega down move to close the big gap up from late 95 and BIG XAU MOVE. bwdik, bb

To: Enigma who wrote (19793)	9/26/1998 8:47:00 AM
From: long-gone	Read Replies (1) \| Respond to of 116764

RE Clinton the market & gold Enigma, I'm betting that if everyone that wished Clinton were to vote their pocket book(as I have done), his poll numbers would change, and he would be out of there quick. I agree with him that "It's the economy stupid". Many Americans only care about the money. Now, if the many of us that wish him from office would only sell every share of every non-gold company or go to cash(or better yet S Francs or???) the market would drop more. The poll numbers would then change, and we could get on with business. rh