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To: donald sew who wrote (56281)	10/25/1998 12:27:00 PM
From: Lee	Respond to of 58727

Hi Don,..Re:If funds continue to outflow from the U.S.BOND market will the interest rates rise some more, keeping in mind that the RATEs already approached 5.20% from 4.69% in 13 days. That was my point yesterday or Friday. No one knows the extent of hedge funds shorts nor the funds that may be required by the Japanese, either for restoring failing banks or running from a further $$ devaluation. A long term chart showing tyx indicates the big downtrend in rates started around the end of May or first of June '97. Chart shows that rates have started back up but I don't have any statistical data on the validity/frequency of V bottoms holding. chart5.bigcharts.com:80/report?r=chart&onbad=badsymbol&country=us&time=10&freq=1&compidx=aaaaa%3A0&ma=4&maval=9&uf=7168&lf=1&type=2&style=3&size=2&symb=TYX&comp=&sid=11421&sec=x&xyz=11559687&s=26882 chart1.bigcharts.com:80/report?r=chart&onbad=badsymbol&country=us&time=7&freq=1&compidx=aaaaa%3A0&ma=4&maval=9&uf=7168&lf=1&type=2&style=3&size=2&symb=TYX&comp=&sid=11421&sec=x&xyz=11608984&s=7752 Another chart shows the S&P vs. TYX and shows the correlation for the recent run-up. bigcharts.com Finally, from James Padhina's column in thestreet.com thestreet.com Lender of Last Resort Bye-bye bull market for bonds? James Grauer of Omnitrage Economics suspects so. His weekly oscillator has signaled an end to a medium-term up-cycle that began roughly four months ago, and his monthly has marked the termination of a long-term bull market that began in June 1997. The convergence of these two indicators at tops, Grauer says, confirms the final phase of lower yields and the beginning of a secular bear market. Bottom line? Purge thoughts of a 4% bond. Grauer is well aware that most fundamentalists will find this counterintuitive and that most technicians will consider it absurd. So why listen to him? Because back on June 6, 1997, his indicators predicted "the formal commencement of the secular bull market in bonds," and the yield on the 30-year dropped to 4.98% from 6.91% over the next 15 months. Other fundamental reasons for higher rates show up when you look at charts of CPI or ECI and finally, the economy is not as weak as the media is trying to portray. Higher rates aren't going to stall or inhibit long term gains as the financials need higher long term rates to maximize profits. Regards, Lee

To: donald sew who wrote (56281)	10/25/1998 2:06:00 PM
From: Tundra	Read Replies (1) \| Respond to of 58727

Don, I am a frequent lurker to this thread and I wish to publicly thank you for your informative posts. I like your approach and analysis; and your sharing of thoughts. I agree with much of your last post but would like to comment a bit on Asia. Specifically Japan. I have been interested in watching that market for quite awhile. I generally watch a live chart of the Nikkie for most of the session . I also consistently read a few Japanese newspapers. FWIW, I have a few comments about Japan. Keep in mind that it is always risky predicting stock movement in Japan because of artificial involvement by government controlled or influenced pension funds. That said, I do not think the underlying economic fundamentals justified the recent rise in the Nikkie. I think it was a result in large part of short term enthusiasm created by the banking reform act and government intervention. The latter, I believe, was motivated in part by the goal of not being blamed for the woes of the world. Recent economic data support this view. In addtition, I think it likely investors will reassess the short term affects of the reform. I do not think they will continue to conlude that such a rosy forecast is merited. My experience here in the US is the banking reform (such as the S&L bailout) produce short term economic pain when implemented properly. I believe Japan's banking problems are considerably. greater than our S&L problems. As far as the no pain no gain point of view; a real disposal of the bad loans and assets secured thereby will very negatively affect the near term prices of the related assets. It will also result, if done properly, in the closing of many business and loss of jobs. That sounds terrible. . But Japan must ultimately address its overcapacity problems. Hopefully, however, at some point during or near the end of the process, the consumer will see the "bottom" and thus may start buying again. It is important in my view to revive the real estate market; it drives many ancillary businesses. I just cannot see that happening to any significant degree while an asset dump threat by the banks is overhanging the economy. Thus, with some trepidation, I expect the Nikkie to be a net loser for the week. I could, of course, be quite wrong. I realize your posts basically deal with a technical perspective and I appreciate them greatly. The foregoing is my fundamental perspective of Japan. Its free, so take it for what it is worth. Please continue your splendid posts. Regards, Tundra