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To: Enigma who wrote (19937)	9/28/1998 6:13:00 AM
From: long-gone	Read Replies (1) \| Respond to of 116764

RE LTCM short gold It was reported on CNBC....

To: Enigma who wrote (19937)	9/28/1998 11:27:00 AM
From: Alex	Read Replies (1) \| Respond to of 116764

Metals and oil lean heavily on the US economy By Stephen Wyatt Asia's economic collapse is now old news in the metals and energy markets. Base metals, precious metals and energy prices have all been devastated by the Asian meltdown. Not that these economies look like recovering any time soon. But it is because metals and energy markets have fallen so hard, so fast, that a number of analysts and traders suspect that these markets have absorbed a lot of the bad news. After all, the oil market has just bounced off its lowest level for 12 years, copper and nickel are both trading just above their recent 11-year lows, aluminium and lead are near four-year lows and zinc is at two-year lows. It's been a bloodbath. The story is even uglier for the gold market. With investment demand for bullion all but disappearing over the past two years on the back of fears of heavy central bank selling of gold reserves, the gold price fell to its lowest level in 19 years in late August. In short, these markets may now have discounted the bulk of the bad news. The risk to the downside is increasingly limited, some analysts and traders argue. But is it? The key issue is whether contagion into other economies will in fact stop. Already Asia has infected Russia and Latin America. Now traders are anxiously eyeing the US and Western European economies. If these cave in to the pressures from Asia, as Russia and Latin America have, then the metals and energy markets will have another nasty leg down. And there are increasing signs that the US economy is slowing but not slumping. "The US is expected to continue to grow at an acceptable pace, but the slowdown worsens the world situation by slowing US imports which many countries are so dependent on," said Mr David Horner, senior currency and interest rate strategist with Merrill Lynch in New York. Even Federal Reserve chairman Dr Alan Greenspan has hinted at a US interest rate cut due to concerns that its economy may be slowing too quickly. Now more than ever, the US economy holds the key to the future direction of commodity markets. Some analysts are reasonably positive. "The performance of the US economy will certainly be a key factor for copper and we expect the US situation to hold reasonably positive, which should serve to prevent copper from experiencing a sharp price decline," said Mr Bill O'Neill, senior futures strategist with Merrill Lynch. But he is hardly a bull. He warns that the upside to base metals prices is "limited by Japan's economic woes and its impact on the rest of Asia. This remains the key factor for base metals and probably for commodities in general." But most analysts and traders remain negative. They still expect further weakness. "I remain a bear," said, Mr Graham Grundy, marketing director of Aluvic, an Australian aluminium exporter. No matter which way you did your arithmetic, you had to come up with substantial aluminium surpluses this year and next, he said. The story is much the same for the other base metals – copper, nickel, lead and zinc – and unless OPEC and some non-OPEC producers can convincingly cut oil production, it's the same for the oil market. "For the base metals, 1999 looks harder than 1998. There's no silver lining in any of these markets, except maybe nickel, where there has been a recent spate of production cutbacks," said Mr Anthony Avitable, base metals trader with Rothschild Australia. Although global recession and a further collapse in demand remain the primary threats to the future of metals and oil prices, the oil market at the moment is getting some help from the supply side – at long last. US oil prices have rallied to nearly $US16/barrel. This is up 35 per cent from last June's 12-year lows of $US11.42/barrel. A lot of the producers continue to sell their output, albeit at lower US dollar prices. A lot of this strength is weather-related. It is hurricane season in the US Gulf, the major oil import point. But also supporting the oil market is better than expected production compliance by OPEC and some reduction in the stock overhang. "There are some indicators suggesting that the state of the oil balance may not be as grossly oversupplied as is widely believed," said Mr Michael Rothman, senior energy analyst with Merrill Lynch in New York. He suggests that the stock overhang has decreased and the time frame and production levels for OPEC to balance the market would be significantly shorter. "At a minimum, this reinforces the notion that we have probably seen the bottom for oil prices," he said. However, if US growth continues to contract, then slowing demand will reassert itself and knock oil, along with the metals and minerals markets, for six. afr.com.au

To: Enigma who wrote (19937)	9/28/1998 2:06:00 PM
From: Ron Everest	Respond to of 116764

Enigma, there was a news article posted recently regarding the root causes of LTCM problems, check out the url below: >>>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 following is worth a re-read: exchange2000.com It would seem obvious that with the many thousands of hedge funds active in the markets that the risks are not yet known, another few like LTCM and the AU markets will really get up a head of steam. IMO we will see governments trying to control the markets, perhaps maintain the status quo, in order to contemplate a passing through of this phase. If the lenders to LTCM were so blinded and passed loans to other hedge risk takers on the same basis as to LTCM, then the system risks are very large whether it be short gold, speculating currencies, speculating interest rates or so on. BWDIK