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To: Crystal ball who wrote (6605)	6/2/1999 9:13:00 AM
From: Hawkmoon	Read Replies (3) \| Respond to of 28311

OT(only in a macro sense): Crystal Ball, You're right about the 6% mark being reached in the bonds this week (IMO). But once reached, there should be a nice rally as bottom is put in. Anyone thinking the Fed is going to raise interest rates this summer is likely basing that assumption on faulty logic. AG has several challenges he faces over the next 6-9 months. One is how to maintain the US economic expansion until Asia and Europe can get on their economic feet and commence recovery. Raising interest rates over short-term inflationary indicators would be whip-lashing markets that are already growing nervous as Y2K approaches. Let me amplify. One of the reasons that bond rates are so high is because of the increased competition that is being applied from the large number of corporate bond offerings in the 1st half of this year. Many corporations have opted to accelerate their offerings, assuming that liquidity may not be there in the 2nd half, as people start hunkering down and taking on a defensive stance. Thus T-bills are getting hit short-term, but in the 2nd half of 1999, they will become the bond product of choice. Inflation just isn't evident to the extent that people believe. We had a short-term run up in oil prices in anticipation of the summer driving season and OPEC production cuts, but historically gas prices decline during the summer as stocks are expended and stored capacity is sold into the marketplace. Neither the CRB or the XAU is comfirming inflationary expectations. In fact, they seem to be indicating even greater pricing pressures in commodities (look at copper). So with no real confirmation of inflation AND THE DISTINCT POSSIBILITY that Y2K may produce RECESSIONARY pressures throughout the fall as spending dries up on IT, capital goods (inventory being built up now will be expended in the first months of 2000), earnings being impacted by having to build these inventories, for Alan Greenspan to raise rates would be INSANE. I can tell you that from my information (folks I know here in DC working on Y2K overseas), there is a LARGE CONCERN over how Asian market psychology will suffer this fall, given their general inability to provide concise information on their readiness. There exists a great potential for a repeat of the vaunted "Asian Flu" with the corresponding flight of capital from emerging markets to the US and Europe. Greenspan knows this and for this reason, will not take any action that could derail confidence overseas for fear of creating a self-fulfilling prophecy. However, AG has a vested interest in squeezing the speculative excess from the US market before this fall, so thus the jaw-boning about inflation and change of bias to tightening. It's a bluff, but an effective one. Just my humble opinion. Regards, Ron