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To: John Hunt who wrote (23520)	11/28/1998 8:54:00 AM
From: John Hunt	Read Replies (1) \| Respond to of 116753

Several New Gold Articles at Privateer Site the-privateer.com

To: John Hunt who wrote (23520)	11/28/1998 1:34:00 PM
From: Alex	Respond to of 116753

Great read John. Thanks................ Fed might come to regret its cut in interest rates Recent moves to stimulate the US market could backfire on Federal Reserve chairman Alan Greenspan, says The Economist 'The more share prices become overvalued, the more they will eventually have to fall' PERHAPS Alan Greenspan knows something that the rest of the world does not. The chairman of the Federal Reserve Bank may have good reason to believe the US economy is on the edge of a cliff. He may have inside knowledge of the risks of an imminent financial bust. But apart from a cryptic reference to "unusual strains" in markets, he is not telling. Given the benefit of the doubt, the Fed's cut in interest rates, of a quarter of a percentage point, on November 17 - the third such reduction in seven weeks - may be sensible insurance against trouble ahead, especially since inflation is low. But big doubts remain. The US economy is still growing briskly. Labour markets remain tight. Money-supply growth is bounding ahead. Moreover, financial worries seem to have eased. The near collapse of Long-Term Capital Management, a big hedge fund which failed in September, is so far a one-off. The stockmarket is gleeful. The Dow Jones industrial average was this week only 3% below its July peak. And fears of a credit crunch are receding. Although the gap remains wider than before Russia's default in August, yields on riskier corporate bonds are falling back towards those on safer ones. Banks are stepping in to lend to companies that cannot borrow cheaply from the bond market. But the US economy looks set to slow sharply next year. Gross domestic product growth may be only 1.5% next year, down from 3.5% this year, according to the Organisation of Economic Co-operation and Development's (OECD's) latest Economic Outlook. Moreover, things could conceivably turn out worse. Consumer spending could fall if Americans start saving again - as they must some day. Companies may cut back sharply on investment after their recent binge. And exports would be hit if the international outlook worsens. The OECD highlights several big risks to the world economy. Brazil could go belly-up. Once-emerging economies in Asia and elsewhere could take another turn for the worse. And Japan's economy could shrink again next year if it fails to sort out its banking mess. Moreover, fragile financial markets could fall back. Stockmarkets could tumble again. Bond markets could seize up. Banks could stop lending. Many of these risks are linked. If one thing goes wrong, so could many others. If they all do, the OECD thinks the US economy could contract by 0.4% next year. But the OECD admits this is unlikely, not least because America and the European Union would doubtless cut their interest rates if things started to go seriously wrong. So what is wrong with the US cutting rates now just in case? Plenty. Every rate cut pumps up an already inflated stockmarket. Investors pile in more money in the conviction that the Fed will bale them out if prices start to fall. Rising share prices, in turn, allow consumers to carry on spending, and companies to keep investing. But the more share prices become overvalued, the more they will have to fall. And the more consumers have spent and companies have invested on the basis of those overvalued prices, the more painful the economy's eventual adjustment will be. The Fed failed to prick the bubble before it grew too big by raising rates a few years ago. It may now regret that; and it may come to regret cutting rates now. - © The Economist Newspaper Ltd, London 1998 Top of page btimes.co.za

To: John Hunt who wrote (23520)	11/29/1998 4:31:00 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 116753

Soros Warns of Recession Ahead NEW YORK (AP) -- Billionaire financier George Soros believes that despite the recent upswing in world markets, the global economy could slip into a recession in the next couple of years, Newsweek reported. Though U.S. stock markets have regained momentum and are now at all-time highs, "we are still in a bear market, and the previous lows will be retested, let's say, next year," Soros told Newsweek in the issue due out on newsstands Monday. The near-collapse of hedge fund Long-Term Capital Management LP nearly drove the market to a meltdown, said Soros. It was staved off by a rescue package brokered by the Federal Reserve, as well as subsequent interest rate cuts by the Fed that injected liquidity into the markets, he added. Still, that won't be enough, Soros said. The United States is in the midst of a "fairly mature boom" and faces increasing cost pressures. Japan remains in recession, and Brazil likely will follow suit, despite a recent global aid package of $41.5 billion, he added. As investment opportunities decrease, Soros said "the global economy is liable to slip into a recession next year or the year after." The creation of a global society could help stabilize the world's financial systems Soros argues in his upcoming book "The Crisis of Global Capitalism," excerpted in the same issue of Newsweek. "To put it bluntly, the choice confronting us is whether we will regulate global financial markets internationally or leave it to each individual state to protect its own interests as best it can," Soros wrote. Ironically, the United States remains a key obstacle in creating this global society, Soros added. "With the right sense of leadership and with clarity of purpose, the U.S. and its allies could help to stabilize the global economic system and to extend and uphold universal human values. The opportunity is waiting to be grasped." Soros runs the $20 billion Quantum group of hedge funds, which have been rattled by the turbulent global economy this year. Hedge funds are highly speculative investment funds with little regulation, though Soros told Newsweek that should change. "I think hedge funds should be regulated, just like any other market participant should be. Now, since hedge funds are offshore, they're more difficult to regulate, but I don't think it's at all impossible if the national authorities cooperate with each other," Soros said.