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To: Lizzie Tudor who wrote (38794)	5/5/1999 8:18:00 PM
From: JF Quinnelly	Respond to of 86076

Armstrong was commissioned to do his study after the 1987 market excitement. I suppose he chose to begin with 1921 because for a number of years prior to this the economy was distorted by the effects of WWI. 1921 would have marked a return to the peacetime economy, and would have been when the newly created Fed was able to influence the economy without the War Production Boards, railroad administration, and other wartime government spending distorting everything.

To: Lizzie Tudor who wrote (38794)	5/5/1999 8:57:00 PM
From: Bonnie Bear	Respond to of 86076

Michelle: one big difference between this market and past markets is the use of financial derivatives. As far as I can tell, derivatives were started by Greenpan and buddies back in the early 70s but didn't start propagating at huge growth rates until 92. Last I can find reference to them by the feds was 94 and at that time they were growing at 30% a year and had a value of 40T. So we could well have 200T worth of underlying derivatives for a 12 T stock market and 8T bond market. My numbers may be off a bit but you get the magnitude of the problem, the derivative products are unregulated and unreported. A big-cap stock is like seeing a borg of the borg collective, there is actually a bunch of derivative products tied to them that cause the stock movement. The ownership and nature of the derivative products for a security is not obvious..it took me a long time to find out mu was tied at the hip of intel, for instance. The big question is how to control the borg. A long and severe recession will slow it down.... high volatility will shake out some of the excess.....hyperinflation by printing dollars will allow the economy to keep up with the borg growth rate...a Y2K failure will give some of the players an excuse to go bankrupt and "kill" borgs. My guess is that they're trying for some combination, but the risk of another LTCM-like disaster seems quite high.