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To: Joe NYC who wrote (16178)	10/8/1998 12:02:00 PM
From: dougjn	Read Replies (2) \| Respond to of 152472

Greenspan acted swiftly and extensively in 1987 because we had a two day drop of 43%. Widespread use of derrivates ("portfolio insurance") was then fairly new, and the add on implications were unknown. It was the most severe one week drop in history, in percentage terms (which is all that matters.) Further, the market had been high, in S&P PE terms, but not nearly so high as it was in mid July 1998. The action restored some measure of calm and confidence. It also was thought by Greenspan (and many others) to have lead to or exacerbated a notable uptick in inflation a number of months later. Leading to tightening rounds that may have contributed to the later 1990 recession. I.e., the price of the dramatic easing (more in adding liquidity ot the system (printing money) than lowering rates, was to have to slam on the brakes later. Which hurt the real economy. Soooo, now we have a situation where Greenspan thought the market was getting dangerously too high in the low 6000's in early 1997. (He had our 1987 experience in mind, and probably more so Japan in 1990. Which he certainly didn't think we were at yet, but thought would be disastrous for us if we did go to such market, and then real estate, bubble extremes.) It seems clear to me that Greenspan is perfectly content to see this market go lower for a while. He might act in a real panic. (10% plus down in a single day.) But otherwise, I suspect he will continue to go slow. He believes the shakeout and move away from risk is a necessary corrective force. And that it's bound to go too far. He wants to ease the impacts on the real economy. That's in effect what he said yesterday morning, and part of what spooked the market. He really doesn't care if the market craters. As long as it's not bad enough to in and of itself create real economy panic. (As the 87 crash might have, had the Fed not acted, dramatically.) Doug

To: Joe NYC who wrote (16178)	10/8/1998 12:40:00 PM
From: limtex	Read Replies (2) \| Respond to of 152472

JH - Valuations are underpinned to a very large extent by confidence. I think that confidemr nce could have been restored by firm and prompt action. It wasn't. Mr Greenspan has only very recently been concerned about what is turning out to be the Great Crash. Until then he was only concerned about inflation. It seemed pretty obvious to most people that the Wolrd Recession of 1997 had squeezed all measurable inflation away but no Mr Greenspan kept interest rates high till five past midnight. I also get the impression that he just doesn't like it when the market goes up. Just sort of doesn't like it. Anyway I hope he is satisfied now that millions of people have lost a lot of their savings. He was proved right and so hopefully that should now satisfy him and those that have all along been warning us who have invested that the whole thing is a legalized ponzi scheme and the Q is now well in the thirties and heading for single figures. regards, L