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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (898)	10/15/1998 9:37:00 PM
From: Freedom Fighter	Respond to of 1722

>>If we want to help our neighbors and ourselves through a rough patch, we should stimulate the growth that lifts the world. << This begs an answer to the question "How can flooding the world with more credits stimulate an economy that is slowing because market forces are trying to remove excess credit?" It is no more than giving a heroin addict another shot to remove withdrawal symptoms. It buys time and stimulates the economy by expanding the excesses. Eventually you run out of bullets, the currency collapses, the credit bubble implodes when people eventually reliquify, or you suck every last drop of blood out of the middle class to prop up the financial system. That is our biggest problem. There is an almost universal misunderstanding by the mainstream of what is going on. When the credit levels were low it was easy to prop them up. We are now much more advanced in the process and noone knows if this is the overdose shot yet. Certainly no journalists at the NY Times. Even if we muddle through this time, we are that much closer to the inevitable and in a much more difficult position to address the problems if we get a competent central banker at the helm next time.

To: porcupine --''''> who wrote (898)	10/15/1998 9:42:00 PM
From: Freedom Fighter	Respond to of 1722

Fleckenstein - Interest Rate Cut More Asian troubles... The big story out of Asia last night was that Nomura Securities announced it is in deep trouble. The stock was down about 10 percent in Japan and the Japanese brokerage index was down about 5 percent. All that bad news took the Nikkei down marginally. The rest of Asia was quiet, as were the S&P futures. Then the news that the Fed cut the discount rate hit the tape. It didn't cut the funds rate further; it just lowered the discount rate. The S&P futures rocketed from 1024 to 1075, up 5 percent in about five minutes, in what has to be the biggest move in the history of the stock market. (Conveniently, the futures limits are bigger in the last hour.) There was a tremendous amount of buying and short covering as the averages lit up. The Sox rallied 4 percent, the Nasdaq and Nasdaq 100 finished up 5 percent, and the bank stock index charged forward for more than 6 percent. The timing of the move was most interesting. It was after all the futures had closed. The only markets open were the equity and equity futures markets. Tomorrow is option expiration. Most of the narrow indexes (Nasdaq 100, Sox, MSH, BKX etc.) expire based on the opening prices. If you were going to do something to cause the most aggravation, it would be in the last 45 minutes on a Thursday afternoon before expiration, while the rest of the world was asleep. Either the Fed is stupid (and we can make a pretty good argument for their lack of wisdom, as I have documented in past Raps) OR it intended to MANIPULATE the stock market WITHOUT the discipline of the dollar getting hammered or the gold market rallying. It is unclear what its motive was, but naivete or stupidity is hard to believe. Live stock quote (Delayed 20 minutes) BANKERS TRUST CORP BT56 7/8+4 13/16 BANKAMERICA CORP NEW BAC49+ 15/16 Last updated 7:50pm ET. For more details on these stocks and more, go to Company Research. Bad news brewing... We have now seen a stupendous turnaround from last Thursday. However violent the selling was a week ago, the buying has been just as aggressive. Some of the big names that I follow have rallied 40-50 percent in the space of five sessions. Obviously the rumors about Bankers Trust (BT), Lehman and BankAmerica (BAC) et al. being in huge trouble, must be true. To compound matters, there was a story in the Washington Post (the official Fed leak source) that quoted an unidentified Fed official as saying that unless something catastrophic happened between now and the next FOMC meeting, they wouldn't change rates. Something major is brewing in the bad news department. I have said in the past that Greenspan is going to go down as one of the most irresponsible Fed chairmen of all time, and I stand by those words. Some would say that of course, we need to ease, but the reason we are in this predicament is because we created too much money and a bubble. Creating more liquidity does not solve that. Once you have 40 shots of tequila, the best way to drive home is not to have another 40 so you don't feel bad. Take the money and run... Anybody who doesn't have to be in the market should take advantage of whatever rally ensues and get the hell out. Obviously there are tremendously large problems in the world if the Fed panicked like this. You are going to see the dollar turn to confetti over time. All these problems are just going to pile up. Use this rally as a gift and take your money and run. I have no idea what is going to happen tomorrow, but I wouldn't be surprised to see a dramatic turnaround in stocks happen rather quickly once it starts. We are in uncharted waters. I expect the dollar to get crushed and gold to shoot higher. The Fed has no respect for markets, as it sees fit to manipulate them all. A currency crisis lies ahead. When your currency goes bad you are sunk: Just ask Asia, Russia and Mexico. Whatever manipulation the Fed attempts will be short-lived. Stocks aren't pieces of paper they are shares of businesses. Should they be worth more because big trouble is coming? Currencies are just paper and without sound policies they are worthless. Two thousand years of history show us one certainty: All paper currencies go to zero. Greenspan has accelerated the process while accentuating and abetting reckless and destructive speculation. Remember that he is supposed to know what the banks are doing. Once again he was asleep while they engineered themselves into a position to implode (see yesterday's Rap and link). Now that that giant mistake (and really this is all an extension of bailing out Mexico in 1994) has erupted, he is pursuing the same policies that got us into this jam in the first place. The stupidity and arrogance is nauseating. Our children all will pay for his incompetence. ENOUGH IS ENOUGH. Somebody get Volcker back before it is too late.