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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Eric Maggard who wrote (21122)	10/30/1998 2:58:00 AM
From: IQBAL LATIF	Respond to of 50167

Eric- Thanks for asking this question-- how do you know about liquidity problems in the market? When I talk about liquidity problem I am not at all referring to equities rather to bond market, the first sign of liquidity crisis is that the interest spreads between lower rated companies what they have to pay and higher rasted blue chip widens sharply, this brings credit markets to a halt. Once tapping of bond markets become difficult we see that this divergence of rates makes swaps very dear, the leverage buy outs and mergers acquisitions along with corporate credit moves the markets forward if that dries down we get into problem, I think that new paradigm of economy new test would be if we still be able to keep the interest rates lower and we see key inflation indexes remain docile. Equity markets sell off has a strong bearing on continued divergence of these yields as right issues and many other take overs have this price of stock a critical element, amongst other things in the market Fed does keep an eye on these divergences and like to see a convergence for an efficient market.. As interest rates are cut and hedge funds the volatile force behind the markets disappear with huge losses we will see that convergence possible it is happening right now in front of us the break of bonds from 135, we had seen that some of these bonds had moved up and the spread between a high yielding Junk and TB had become as high as 800 basis point, that is now converging so is Italian and German Bund.. If Jonh Merriwether positions were allowed to be continued right now he would be making a lot of money but the problem is that without John Merriwether positions we would have not seen bonds at 135, however we had this first close above 10,000 on HSI.. I was wondering if hedge funds have lost their desire to short- the market just have bulldozed these exotic bet takers, like it has done on my small little SI..gg