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Strategies & Market Trends : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: Roger A. Babb who wrote (2314)	11/12/1998 3:21:00 AM
From: paulmcg0	Read Replies (1) \| Respond to of 3339

I have found that the academic papers of the Fed are quite useful. You can search for topics at frbsf.org . Currently, I am reading a 1997 paper titled "Bank Deposits and Credit As Sources of Systemic Risk" by Robert Eisenbeis. This file is in Adobe Acrobat (PDF) format and can be found online at frbatlanta.org . (You will need the free Adobe Acrobat Reader 3.0 software to view this file, which can be downloaded at adobe.com ) It's hard to believe, but a Fed official actually says things like: "One prominent thesis argues that the financial system is inherently unstable and is therefore vulnerable to random shocks" and "do financial crises cause declines in real economic output, or are they instead manifestations of deeper problems in the real economy?" Paul M.

To: Roger A. Babb who wrote (2314)	11/12/1998 8:34:00 AM
From: Roger Smith	Respond to of 3339

Hi Roger, I think that Greenspan would not reduce the rates. The idea of rate reduction was to stabilize the market. With market roaring back, he would be very reluctant to cut the rates. I believe, with or without rate cut, this market may be heading for a short term correction.

To: Roger A. Babb who wrote (2314)	11/12/1998 6:11:00 PM
From: Ted Shelton	Respond to of 3339

Ted, I think Greenspan will cut by 1/4. The market expects that... Roger: I agree that the market expects it -- and is buying on the rumor. But this is exactly why I wonder whether Greenspan can afford to give in and lower rates -- he can't do it that many times -- and he shouldn't do it just because the speculators are holding a gun to his head (in the form of a market that will drop, and therefore negatively affect consumer and business confidence). So I am thinking that if I were Greenspan I would hold rates on the 17th -- causing a correction. Then on the day after Thanksgiving, I'd lower rates by a 1/4 % -- surprising people but on a slow trading day and with the weekend for everyone to think about this. The message to the speculators is -- Greenspan doesn't dance on demand. And the different message to consumers and businesses is -- stop being so focused on the markets, the Government is here to take care of long term issues, and will make the right moves - but short term volatility isn't related to actual economic conditions. Anyway, that is one fantasy for how things will unfold -- but I sure can't imagine, with Greenspan's record on these things, that he will lower rates just to keep speculators happy. I sure am glad I am not in his shoes though! -Ted