>From: Richardson_D <[EMAIL PROTECTED]> >To: pen-l <[EMAIL PROTECTED]> >Subject: Bear Market? (Formerly Japan's MoF) > >Hi Doug -- >As far as I can see the Fed is controlling the market very closely these >days with 3-month treasuries. At least when the market is down interest >rates seem to be down as well and conversely. Thus it seems that the >Fed is preventing a real melt down in stocks while at the same time >denying any impulses the market may have to go up. Thus you may very >well be in luck and the bear market be well established fairly soon. > >The recent experience we have had with central bank control of the stock >market is in Japan from 1987 to the present when the market gradually >fell from the 38000's (?) to the current 14000's (?), a truly prolonged >bear market. At the same time the short interest rate was reduced below >1%. > >It is interesting to attempt to apply this history to the current U.S. >situation. For me the most upsetting element of Wall St. was the chart >on p. 81 showing the net U.S. credit position since 1952 as a percent of >GDP. From a break even position in 1982 we now are in hock for 16% of >GDP, an amount that is increasing rapidly. The Fed must be aware of >this, and must also be aware of the powerful effect interest rate cuts >can have in reducing the value of the dollar and thereby tending to >restore some sort of trade balance. > >On the other hand it may be that the situation has gone too far already, >and if the dollar were to begin a long descent speculation would force >an immediate crash and an abrupt end to the current world economic >system, i.e., with the dollar as the international currency and the U.S. >as the consumer of last resort. Indeed there is real peril here since >roughly half of international trade consists of INTRA-corporate >transfers and, except for the EC and Japan most currencies are pegged to >the dollar anyway. Thus it is not clear that devaluation can restore >the U.S. trade balance, at least at dollar values that are acceptable to >speculators and in terms of its role as the international currency. > >Yet what else can they try? At some level of international indebtedness >the willingness of speculators to hold dollars will disappear, and it >would appear from your chart that that day is fast approaching. At >least the low interest rate approach has some hope of saving the U.S. >stock market from a true melt down and could provide benefits both >domestically and internationally in propping up demand and staving off >the global recession (depression?). > >Dave > >---------- >From: Doug Henwood[SMTP:[EMAIL PROTECTED]] >Sent: Friday, January 23, 1998 11:17 AM >To: [EMAIL PROTECTED] >Subject: Re: Japan's MoF > >Jay Hecht wrote: > >>The "bears" in the latest Barron's roundtable all repeat the same >thing. >>Another "Rational Expectations" hypothesis - all assertion, no facts. > >I can't read that crap anymore. Either makes me want to scream or go to >sleep. All I care about is that a bear market be well established by the >time the paperback of Wall Street comes out. > >Doug > > > > >Attachment Converted: C:\ISTAR\EUDORA\BEARMARK > Regards, Tom Walker ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Know Ware Communications Vancouver, B.C., CANADA [EMAIL PROTECTED] (604) 688-8296 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
