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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (5353)	5/25/1999 4:28:00 PM
From: Justa Werkenstiff	Read Replies (2) \| Respond to of 15132

Well, the probabilities that the Fed. will tighten anytime soon have materially decreased IMO. USA Today reports that emerging market credit spreads have widened once again. The emerging markets are contracting again in the equity and credit departments and since this was the primary reason why the Fed. eased rates last fall, the probability that the Fed. will tighten is materially less in the face of this situation. Watch the small caps in our market. That is where the credit crunch caused liquidity fears which , in turn, caused the small caps to tank. And with each day the correction proceeds, the probability that Brinker will see a bear market also decreases. The worst thing we could have is some inflation data uptick. The Fed. then would be in a very tough position.

To: Justa Werkenstiff who wrote (5353)	5/25/1999 4:41:00 PM
From: Justa Werkenstiff	Respond to of 15132

This is from the March FOMC minutes: "While many believed that the next policy move likely would be in the direction of some tightening, such an outcome was not a foregone conclusion, and in any event the timing of the next policy action was highly uncertain. It also was noted that a biased directive would not be consistent with the members' view that a policy adjustment was unlikely in the period just ahead. Moreover, while the Committee's disclosure procedures do not always require the immediate announcement of a shift in symmetry, the members agreed that were they to announce a shift to a tightening bias, it would likely have in current circumstances a relatively pronounced and undesired effect on financial markets. In particular, the markets might well build in higher odds of a policy tightening move at the May or June meetings than currently was consistent with the members' thinking." The effect of the tightening bias in the US markets was desired; the unwanted consequence of the bias is what has happened in the emerging markets.