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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Gersh Avery who wrote (30958)	10/8/1998 11:41:00 PM
From: flickerful	Respond to of 94695

financial times/editorial/9 october 98 The battered dollar The violent movements in the dollar/yen exchange rate over the past two days are a stern reminder of just how great an impact the emerging market crisis is now having on the developed world's financial system. The weakening of the dollar against the yen was probably sparked by the combination of a gloomy speech on the US economy by Alan Greenspan, chairman of the US Federal Reserve, with new hope on a bank restructuring deal in Japan. But the magnitude of the movement was almost entirely due to a cascade of hedge funds and other financial institutions, which had bet on a weak yen and strong dollar, unwinding their positions. Two questions now arise. First, if the currency movements are sustained, what are the implications for the world economy? And second, what role are the west's financial institutions now playing in spreading the crisis? The impact of a weaker US dollar and stronger yen could be fairly benign. It could even help to reduce the probability of further emerging market contagion. The weaker dollar will take some of the pressure off currencies pegged to it, such as the Brazilian real. The stronger yen should help to support Asia's currencies. A stronger yen could also be good news for the Japanese economy if it makes it easier for the authorities to launch a large- scale monetary expansion; against this, if the currency movements go much further, Japanese manufacturers could find themselves in severe difficulties. As to the second question, the events of this week are symptomatic of the scale on which financial market contagion is now spreading into the developed world. The accepted wisdom until recently was that the crisis would affect the developed world via trade flows. The collapse of Long-Term Capital Management quickly changed that view. Now, western central bankers are becoming increasingly concerned about how their own financial institutions are coping. Highly-leveraged institutions are proving vulnerable to the unprecedented movements in the financial markets. The collapse of LTCM is having a widespread effect. It would not be surprising if this latest turbulence claimed another victim. More broadly, there is growing evidence that financial institutions are becoming much more risk-averse. The mass exit from dollar/yen trades is just one example of this. Alan Greenspan, speaking on Wednesday, said that a rush to liquidity has led to a widening of yield spreads even within the highest-quality US assets, and a marked tightening of credit conditions. The direction of the movements in the dollar and yen may prove benign, even helpful. But such extreme exchange rate volatility can only do further damage to global economic stability.

To: Gersh Avery who wrote (30958)	10/8/1998 11:47:00 PM
From: Follies	Respond to of 94695

bobby et al, put on your beanies and answer this. Why is the Hang Seng still going up? It never has really corrected here, how come?

To: Gersh Avery who wrote (30958)	10/8/1998 11:48:00 PM
From: William H Huebl	Read Replies (2) \| Respond to of 94695

Gersh, By my estimate, there is at least 200 (two hundred) BILLION dollars that could want out of the market in one day! So think what would happen if all these BTDers get POed and decide to get out. Here is the link for the flows: amgdata.com You can see that 26 (twenty six) billion went into money market accounts!!! That is more like the kinds of flows that can hit this market overnight. Like TOMORROW!!! THIS IS AN EXTREMELY DANGEROUS MARKET!!! Bill