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

To: James F. Hopkins who wrote (31959)	10/19/1998 2:06:00 AM
From: mozek	Read Replies (2) \| Respond to of 94695

Thanks. Personally, I don't think the market is discounting the current global turmoil anymore. With the problems in Latin America and Canada, and the systematic draining of our markets' liquidity that's only recently coming to light, the US will be very fortunate to get out of this phase without some serious economic pain. I hope we do, but I'm not convinced we will. I think many of your assessments make a lot of sense, and wanted your opinion. I actually think that the approach they seem to be taking (asking for aid with clear reform contingencies) is more responsible than the previous situation in Japan. WRT Greenspan and the local bailout, I'm not sure what choice we could have made that would be undoubtedly better. The LTCM bailout and recent moves to prevent a market crash, while debatably hippocritical, are probably better than the alternative. If one owes too much, through leverage or any other means, the system can often end up eating it in the shorts. The major part of the hedge fund problem that I'd like to see adressed is an accounting and regulation of the degree of leverage that can be used in our markets. It seems that we have a situation that, in some ways, is similar to the S&L debacle. We've probably even got many of the same players involved. Obviously, the credit risks being taken by some very large players are passed on to the average investor through leveraged asset inflation. While these problems should be possible to address through regulation and disclosure, any immediate moves to regulate would bring down the house of cards. In fact, I think any clear move towards regulation with an overt and near term timeline would risk the same result. People complain a lot about Greenspan, but I'm not sure what he should have done differently. We're in a pretty tough spot, and, frankly, short of money supply inflation, asset inflation, temporary reduction in rates, and subsequent real inflation, I'm not sure what measures could be taken immediately to avoid a meltdown. Thanks, Mike