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To: Giraffe who wrote (19957)	9/28/1998 7:11:00 AM
From: Alex	Respond to of 116762

OCTOBER WILL BE BRINGING MORE TRICKS THAN TREATS By JOHN CRUDELE ------------------------------------------------------------------------ CALL it Octobermess. It's sorta like a feast on Wall Street, except that it is a celebration of losing. More often than investors would like to remember, the stock market has suffered horrible performances in October. And next month - with impeachment of a president being contemplated, financial troubles around the world and an unknown number of (tick-tick-tick) hedge funds waiting to explode - is setting itself up to be very, ahem, interesting. Even last Friday's modest turnaround to the plus side was engineered mainly by shenanigans of one brokerage firm, which concentrated its buying on stock index futures. It looked, I have to say, very suspiciously like someone trying desperately to fix a broken market. Octobermess has a wonderful tradition. Around this time each year people like me start writing about the history of October. And investors start worrying, as if anxiety were set off by some internal clock. There's good reason for all this. There is, of course, the famous collapse in 1929 that led to the great depression. And the equally famous - only because it is fresher in our memories - decline of 1987 that led to millions of ulcers. But October is also a fickle month. While its history of volatility is legendary, it also is renowned among market historians as the month that produces the best chance for Wall Street's most loved cliche - the buying opportunity. In the past, if you could survive the traditional October plunges, you might be in for a treat by Halloween. The Stock Traders Almanac, for instance, says that the Octobers of years 1946, 1957, 1960, 1962, 1974, 1987 and 1990, which had severe drops, finished up. Even when not preceded by big declines, Octobers have turned in some stellar performances - like the 11 percent bump in stock prices in 1982. But then there are Octobers when declines in stock prices simply led to more declines. In 1973, for instance, a 3 percent drop in October led to a 20 percent decline in prices by Dec. 5. And while last October's drop of 12.4 percent was followed by a huge rally, that rally was followed by the current disastrous market. So which October will this be? Will there be a huge decline that leads to a rally? A decline that leads to more declines? Or, perhaps, this coming month will break the mold altogether and be one of those rare Octobers where everything goes right. Don't bet on the last option. Since 1950, Standard & Poor's 500 stock index has scored 27 gains in October and 20 losses. Not a good record, especially since some of the losses have been major. In fact, the average loss for the month has been a portfolio-whacking 7.9 percent. No, next month is setting itself up to be another exciting October. Here's why. This week, the Federal Reserve will decide whether or not to cut interest rates. After the song-and-dance that Fed Chairman Alan Greenspan did last week, it is very likely that interest rates will go down. And if they don't - because the Fed fears further weakness in the dollar or some other hidden problem - Wall Street will have a fit. The trouble is that this rate cut, as I said Friday, will occur mainly to bail out the financial system. With so many financial institutions apparently sitting on trading losses worldwide, the Fed will ease credit in hopes that they'll regain some of their profits here to offset losses abroad. But in order to do that, the financial wizards of Wall Street will have to borrow more money and make more risky trades. An interest-rate cut encourages leverage and risk taking. And that's what got many of these institutions into trouble in the first place. Corporate profit reports are coming soon, and it isn't a question of whether the earnings will be weak. It's merely a case now of whether companies have adequately warned Wall Street about how bad they will be. Russia. China. Japan. South Korea. Mexico. Latin America. You can pick the next financial flareup as well as anyone else. And the current lull in the Clinton scandals won't last forever. Next will probably be indictments (maybe a lot) followed by more information going to Congress. One good source tells me there'll be a second report to Congress and one eventually to the three-judge panel that oversees Kenneth Starr's investigation. And unless Starr suddenly gets cold feet, some of the stuff coming out could be very troubling to the country and to the financial markets. Even in the unlikely event that Starr delivers nothing else, Washington is likely to be in a political stalemate for some time. So there won't be much that Greenspan or Treasury Secretary Robert Rubin will be able to do in the event of additional troubles here and around the world. Except, of course, to put on a happy face. Give one of those speeches about how well the economy is doing. And maybe cut interest rates a second time. And a third. Or enough times so that the action becomes meaningless to investors. Washington could, of course, rig the stock market. I explained a couple of weeks ago how it could be done. And Friday's bizarre rally in just blue-chip stocks - which began with suspiciously exuberant futures buying - indicates that someone may be ahead of me on that idea. But once America goes down that road its financial markets will never be the same. It could be one hell of an October. nypostonline.com