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

To: Sam who wrote (6746)	9/26/1998 11:31:00 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 9980

Sam, I think that the FED's think more in term of "soft landings", namely, when excess develop, they move against the prevailing wind and let imbalances ebb back into balance rather then "crash" into balance. Right now, in the US, there is no immediate need to stimulate demand nor need to increase borrowing (consumers are already "overborrowed" lower interest rates may exacerbate this situation). The domestic economy is in pretty good shape and few quarter of sub par growth would be more what the FED's are after rather then actual negative growth. With such sub par growth, increases in workers' earnings, even if it comes on the "back" of corporate earnings, would tend to improve consumers balance sheet. The problem the FED's face is a possible financial accident (and to prevent such an accident, they organized the rescue of LTCM, but they did not rescue the investors of LTCM, the investors took a hair cut of 90%), I think that they are keeping the fiscal instruments to counter such a development dry, as long as the tightness does not choke the economy. Right now, it seems to me they are doing quite a credible job in this respect. The Feds may also be faced with the initial trend of a weakening dollar (due, possibly to our trade deficit growing much too fast) and lowering domestic interest rates would exacerbate this situation as well, so they may wait to the "breaking" point on that, allowing some reignition of the economic engines in Asia before they let our dollar weaken too much. Once they feel that Asia is getting back on its feet, they may slowly act to bring the dollar back down to reduce the trade deficit and get things back into balance. Zeev

To: Sam who wrote (6746)	9/26/1998 11:31:00 AM
From: Stitch	Read Replies (1) \| Respond to of 9980

Sam, <<But, if this is true, does the Fed actually want to add to the credit crunch in much of the world? Or try to make it easier for loans to be serviced, and buy some time for these problems to be worked out?>> Actually you suggest to me another question by posing the questions above. I would be interested to have a straw poll here as to what each of us think is the probability of a soft landing and recovery versus a hard landing. I do not refer to the U.S. stock market but more to the global deflationary spiral. I can assume certain positions of course. Kam is locked and loaded to make money no matter what happens <G> and will be here to say I told you so. Zeev is likely to preface remarks about a recovery with "If Japan" etc etc. Tippet, Bernie, and Clark are all headed for the hills after buying up all the ammo and freeze dried tuna casserole, and I think you and I are still here but watching their disappearing trail dust wistfully. I am really curious to know the general outlook of our individual tribal posters here. Joking aside I think I am leaning to a mild recession scenario in the states which will export to Europe. From flat line to 1-2% negative I would guess, the serious numbers starting in the latter half of 99. Our early signs will be in the employment figures I suspect. Asia is in for a long recovery I am afraid. I just do not see adequate leadership or fundamentals in any of the countrys there to avoid a further melting down. I believe it will cost the world a step or two backwards in the great move towards democratization and it will prolong a global market reengineering based on high level diplomacy. Bretton Woods will be cast aside and a new buzz word will enter the lingo eventually. South and Central America will also suffer a mild recession in my opinion but the intelligence of NAFTA will become abundantly clearer eventually. All of the above IMHO and highly suspect for inadequate knowledge and thinking. Best, Stitch