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To: marginmike who wrote (15908)	10/2/1998 11:38:00 AM
From: dougjn	Read Replies (1) \| Respond to of 152472

I think the viewpoint you expressed is the one that predominates during rallies, and the one I most recently expressed is what predominated during declines. In a sense I believe in both perspectives. Either is possible. I certainly don't think that a recession is priced into the market however. I think it STARTs getting priced in at market bottoms. But still only as more likely possibility, rather than a conviction. The we oscillate back up on thoughts that we're still doing fine. I agree with your notion of loading back up the boat somewhere around the low 7000's. Although I will be guided less by exactly what the Dow & S&P are at, than whether we've had a semi-panicked sell off in response, most likely, to some financial shock. However, I think it highly unlikely that the market will simply proceed to move strongly up from there and past the July highs. We're in for a trading range for some time. Which may or may not have a downward bias. Why? Because we certainly are not as low as its reasonable for the market to go if we do go into a recession. And periods of worry about those possibilities, at least, aren't ending next month. Seems to me. Doug

To: marginmike who wrote (15908)	10/2/1998 12:03:00 PM
From: dougjn	Respond to of 152472

<<I think that the USA will go to whatever lengths necessary to support Brazil and Mexico>> I think that Rubin and Clinton would like to go to those lengths, if necessary, but that Congress may well not let them. Or let them fast enough. (They couldn't get the full Mexico standby package. Rubin had to raid some discretionary fund, which led to dark mutterings from some Repubs. about impeaching him. And then it turned into a great success, so the noise stopped. I don't think Rubin still has that Treasury slush fund available and unrestricted. Not sure, actually.) LTCM was an extreme situation, and had managed to wangle much greater leverage with much less daylight than anybody else. But there are plenty of banks, brokers and other hedge funds that also made bets on emerging market debt spreads narrowing. And a wide variety of other leveraged derivatives bets. One pretty scary thing is that I think it's pretty clear that nobody, not even Greenspan, really knows the dimensions of the derivatives exposure among financial institutions generally. But every time something like LTCM now, or the Russian implosion before, turns up, it ends up there's a lot more exposure in a lot more places than was thought. A lot of supposedly collateralized positions don't turn out to be collateralized with stuff that remains solid in a crisis. LTCM also isn't fixed. The Goldman's, Merrill's, and Morgan's that were sort of told by the Fed that they had better collectively step up to the plate, injects some equity, and cease the margin calls or they could be SURE they were going to take a horrific beating on the forced liquidation of the obscenely leveraged spreads they had lent into. Now they're still faced with unwinding those spreads. And the market is still not going in their direction. Treasuries are going up and lots of third world debt and junk bond debt (e.g. Globalstar) isn't. It COULD end up OK. But to avoid a Chernobyl for sure, they are sitting on a potential one. I also think its pretty certain that financial world jobs are going to be lost in pretty strong numbers this bonus season (end of the year). That won't do the Street's mood any good, as the survivors look right and left and worry. Doug