From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #396 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Tuesday, September 29 1998 Volume 02 : Number 396 In this issue: Re: [CANSLIM] Quiet [CANSLIM] "M"; Greenspan; etc. Re: [CANSLIM] "M"; Greenspan; etc. Re: [CANSLIM] "M"; Greenspan; etc. Re: [CANSLIM] "M"; Greenspan; etc. Re: [CANSLIM] "M", Greenspan, Long Term Capital Re: [CANSLIM] "M"; Greenspan; etc. Re: [CANSLIM] "M"; Greenspan; etc. [CANSLIM] One more on tomorrows "RATE DROP", then I'm off to bed! I promise! [CANSLIM] A Killing in Stocks! Literally! [CANSLIM] Japan [CANSLIM] Bloomberg Business Report - Interesting Reading [CANSLIM] Not: delayed quotes nice web page Re: [CANSLIM] Quiet [CANSLIM] NonCANSLIM--Broker Query [CANSLIM] Volume Info. [CANSLIM] CBTSY ---------------------------------------------------------------------- Date: Mon, 28 Sep 1998 17:25:53 -0400 From: "Frank V. Wolynski" Subject: Re: [CANSLIM] Quiet Had a small position in DELL, let it go this morning. Back to 100% cash, for better or worse. Frank Wolynski At 21:56 9/28/98 +0200, you wrote: >It is so quiet here, it is scarry... > >B^) > >P.S.: Chicken little here toke profits and is back to 100% cash. I wonder >what our group members have and are doing protfoloio-wise... > > > >Johan Van Houtven / CLICK! N.V. > - - ------------------------------ Date: Mon, 28 Sep 98 16:43:400 -0500 From: Jeffry White Subject: [CANSLIM] "M"; Greenspan; etc. Dan wrote: >>OK. I was unaware of the <"bear flag"/"wedge" formation we are in.> . Now, I was wondering how or where I could get the idea, and I went to Yahoo, pulled up a one year chart on the Nas index and brought up the MAs, and I think I probably see what you are talking about. That being the 300 point VERY sharp drop at the end of August, followed by September's sawtooth revival (the flag?). This (you are inferring) is a pretty strong signal of another drop coming. I am not aware of the pattern and its significance, but won't argue with this except to say that I think that the FOMA meeting Tuesday, IF it brings a rate cut, could signal an all bets off on this scenario. At least, it seems so to me. They say the employment report Friday is very important, but I'd have to think that the FOMA meeting Tuesday is 5 times as important for "M". >> Yeah, pull up any major index chart and you will see the same type formation. From the major reversal low of late we have made progressively higher highs and higher lows. The formation has some fairly strict parameters, meaning you can draw nice trendlines across the highest highs and the lowest lows in the formation and both uptrend nicely. Price action has been very well behaved within that pattern. I don't know what the formation is, really, I only know it is being referred to predominately as a "bear flag" by the bears, and as a "wedge" by the bulls. When the trendlines are ultimately breached, in either direction, I suppose we'll know the answer. Don't know about all your thougts on a rate cut, etc., but if Tom W. is correct, and there's no cut, my gut says we'll retest the recent lows in dramatic fashion. Just hope I have the nads to short the thing around 1085 in the SP,lis if they'll run it there in anticipation tomorrow. Jeff - - ------------------------------ Date: Mon, 28 Sep 1998 20:02:06 -0400 From: "Tom Worley" Subject: Re: [CANSLIM] "M"; Greenspan; etc. I am still expecting no rate cut tomorrow, and a sharp selloff in reaction. Don't anybody bet the farm on my opinion, tho. As I said before, Greenspan may be seeing more danger in not cutting than the danger I see in an early cut, and may have been doing more than "just talking down the dollar". The degree of presumption that there will be a rate cut tomorrow concerns me, no longer is there talk of "if there will be a cut", now it seems only to be "how large will the cut be". Thus, if there is no cut, it will not only tank the mkt, but force many to go back and examine and reassess just what it was that Mr. G was saying. "M" is quite fragile right now, a several hundred pt drop in a few hours will cost us dearly. And I suspect the recent recovery in several notable mkts comes more on expectation of US help, at least by weakening the dollar thru rate cuts, if not with direct intervention similar to what was done for a certain hedge fund, than thru any true fundamental changes or reasons. Tom W - -----Original Message----- From: Jeffry White To: canslim@lists.xmission.com Date: Monday, September 28, 1998 6:08 PM Subject: [CANSLIM] "M"; Greenspan; etc. Don't know about all your thougts on a rate cut, etc., but if Tom W. is correct, and there's no cut, my gut says we'll retest the recent lows in dramatic fashion. Just hope I have the nads to short the thing around 1085 in the SP,lis if they'll run it there in anticipation tomorrow. Jeff - - - - ------------------------------ Date: Mon, 28 Sep 1998 17:10:18 -0700 (PDT) From: dbphoenix Subject: Re: [CANSLIM] "M"; Greenspan; etc. <> Maybe, maybe not. During the last major correction, the retest from the rally high was only 7%. There is no rule that says we must retest the lows. - --Db _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ Date: Mon, 28 Sep 1998 18:17:44 -0700 (PDT) From: rolatzi Subject: Re: [CANSLIM] "M"; Greenspan; etc. A very dramatic moment seems to be unfolding. I wonder if Greenspan realizes or cares that the major averages are pushing up against the 50 MA resistance? Any suggestions for a put to buy some insurance? Ciao, rolatzi - ---dbphoenix wrote: > > < correct, and there's no cut, my gut says we'll retest the recent lows > in > dramatic fashion. Just hope I have the nads to short the thing around > 1085 > in the SP,lis if they'll run it there in anticipation tomorrow.>> > > Maybe, maybe not. During the last major correction, the retest from > the rally high was only 7%. There is no rule that says we must retest > the lows. > > --Db > > > > > > _________________________________________________________ > DO YOU YAHOO!? > Get your free @yahoo.com address at http://mail.yahoo.com > > > - > > _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ Date: Mon, 28 Sep 98 21:23:39 PDT From: "Walter Stock" Subject: Re: [CANSLIM] "M", Greenspan, Long Term Capital > I am still expecting no rate cut tomorrow, and a sharp selloff in > reaction. Don't anybody bet the farm on my opinion, tho. As I said > before, Greenspan may be seeing more danger in not cutting than the > danger I see in an early cut, and may have been doing more than "just > talking down the dollar". Hi Tom, Glad that the worst of hurricane Georges passed you by. "M" is getting more complicated than I can remember. I think we will see a rate cut tomorrow, not least because of the bailout at Long Term Capital. I have been giving this some thought, and looking back, I realized that at the time of Greenspan's testimony last week, he may already have had early warning of the meltdown. If so, it would explain why he looked (to me at least) a little more urgent than usual. So why were all these major players so eager to fork over $300 million each for LTCM? Perhaps because the alternative was too horrible (Barron's seemed to say that on the weekend). A more cynical explanation is that only those involved in the rescue get to look in Long Term's books and find out what their trading positions are. If you know what the trades are and you know that the trades have to be unwound, you can make an absolute killing in the marketplace. A Reuters newswire piece on quote.yahoo.com tonight suggests that this may already be underway : Even as details of the deal were being worked out, some banks were already trading based on expectations of dumping Long-Term Capital= 's bonds and derivatives, traders said. The most visible impact Monday was in the British sterling interes= t rate swaps market, traders said. The gap between the 10-year swap rate = and British government bonds, or gilts, increased to 93 basis points = from 85 basis points on Friday in the 10-year maturity, dealers said.... Long-Term is believed to have a short position in British gilts = and a long position in sterling swaps, traders said. In Eurobond futures, Goldman Sachs sold a whopping 10,000 contract= s between Friday and Monday which traders claimed was an unwinding = of a transaction with Long-Term. Officials at Goldman did not return phone calls. ---- Reuters An even more cynical suggestion is the internet rumour (no more than a = rumour) that the Long Term rescuers had read a rate cut reward into the private = comments of the New York Fed at the bailout meeting. My guess? Chance of 1/2 point rate cut: 55 % Chance of 1/4 point rate cut: 40 % Chance of no rate cut: 5% (only happens if Greenspan fails to persuade = hawks). This is only my estimate. Use at own risk! I agree Tom, that "M" is fragile. I think we may see a selloff even with= a rate cut. The old "buy on the rumour, sell on the news" thing. My trades tomorrow (if any) will be strictly daytrades. Walter Stock Oakville, ONT - Canada - - ------------------------------ Date: Mon, 28 Sep 1998 20:41:27 -0500 From: "John Adair, M.D." Subject: Re: [CANSLIM] "M"; Greenspan; etc. I guess I missed the bear flag/wedge formation information and am surprised to hear this . I feel the market has already factored in the rate cut and likely wont Have that much an impact unless it doesn't happen. The # of stocks in 'A' and B accumulation had returned to almost where it was in Jan- march. I predict more sideways movement except for Dell. I think someone had tied a tin can to its tail Jeffry White wrote: > Dan wrote: > > >>OK. I was unaware of the <"bear flag"/"wedge" formation we are in.> . > Now, I was wondering how or where I could get the idea, and I went to > Yahoo, pulled up a one year chart on the Nas index and brought up the > MAs, and I think I probably see what you are talking about. That being > the 300 point VERY sharp drop at the end of August, followed by > September's sawtooth revival (the flag?). This (you are inferring) is > a pretty strong signal of another drop coming. I am not aware of the > pattern and its significance, but won't argue with this except to say > that I think that the FOMA meeting Tuesday, IF it brings a rate cut, > could signal an all bets off on this scenario. At least, it seems so > to me. They say the employment report Friday is very important, but > I'd have to think that the FOMA meeting Tuesday is 5 times as > important for "M". > > >> > > Yeah, pull up any major index chart and you will see the same type > formation. From the major reversal low of late we have made progressively > higher highs and higher lows. The formation has some fairly strict > parameters, meaning you can draw nice trendlines across the highest highs > and the lowest lows in the formation and both uptrend nicely. Price action > has been very well behaved within that pattern. > > I don't know what the formation is, really, I only know it is being referred > to predominately as a "bear flag" by the bears, and as a "wedge" by the > bulls. When the trendlines are ultimately breached, in either direction, I > suppose we'll know the answer. > > Don't know about all your thougts on a rate cut, etc., but if Tom W. is > correct, and there's no cut, my gut says we'll retest the recent lows in > dramatic fashion. Just hope I have the nads to short the thing around 1085 > in the SP,lis if they'll run it there in anticipation tomorrow. > > Jeff > > - - - ------------------------------ Date: Mon, 28 Sep 1998 21:48:43 -0400 From: "Frank V. Wolynski" Subject: Re: [CANSLIM] "M"; Greenspan; etc. I believe CNBC only mentioned 3,287 times, that tomorrows rate cut was really only a matter of how much, not if! I didn't get the exact number, I am interpolating from my enormous experience gained from counting lightning strikes in West Central Florida. I monitored CNBC for brief periods and it was the 'subject de jour'. It felt absolutely eerie! At one point I noticed the hosts give each other a side glance when they mentioned it, with a little twinkle in their eyes. I can't help but feel absolutely in the dark as to the ramifications of cutting rates, with no hard economic data to support the cut. There are so many ifs/thens and maybes out there. It is comforting to know the markets will not go straight up, hit the bell and someone else will walk away with all the cash in the world. I feel no compulsion to trade tomorrow in any direction. If anything maybe short the spyders once the thick briefcase is spotted and the tick hits +600, a big if. This time on paper only! I don't know Greenspeak well enough and the undertones of worldwide and now domestic economic troubles are enough to give anyone the heebee jeebies. Besides, all my indicators point down. Interest rates or not! Cash in my pocket, I'll live to trade another day! Frank Wolynski At 20:02 9/28/98 -0400, you wrote: >I am still expecting no rate cut tomorrow, and a sharp selloff in >reaction. Don't anybody bet the farm on my opinion, tho. As I said >before, Greenspan may be seeing more danger in not cutting than the >danger I see in an early cut, and may have been doing more than "just >talking down the dollar". > >The degree of presumption that there will be a rate cut tomorrow >concerns me, no longer is there talk of "if there will be a cut", now >it seems only to be "how large will the cut be". Thus, if there is no >cut, it will not only tank the mkt, but force many to go back and >examine and reassess just what it was that Mr. G was saying. > >"M" is quite fragile right now, a several hundred pt drop in a few >hours will cost us dearly. And I suspect the recent recovery in >several notable mkts comes more on expectation of US help, at least by >weakening the dollar thru rate cuts, if not with direct intervention >similar to what was done for a certain hedge fund, than thru any true >fundamental changes or reasons. > >Tom W > >-----Original Message----- >From: Jeffry White >To: canslim@lists.xmission.com >Date: Monday, September 28, 1998 6:08 PM >Subject: [CANSLIM] "M"; Greenspan; etc. > >Don't know about all your thougts on a rate cut, etc., but if Tom W. >is >correct, and there's no cut, my gut says we'll retest the recent lows >in >dramatic fashion. Just hope I have the nads to short the thing around >1085 >in the SP,lis if they'll run it there in anticipation tomorrow. > >Jeff > > > > > >- > > > >- > > - - ------------------------------ Date: Mon, 28 Sep 1998 22:24:11 -0400 From: "Frank V. Wolynski" Subject: [CANSLIM] One more on tomorrows "RATE DROP", then I'm off to bed! I promise! Fed seen venturing into hazardous global territory By Isabelle Clary NEW YORK, Sept 28 (Reuters) - The Federal Reserve's success in presiding over the best U.S. economy in decades may be drawing the U.S. central bank into a global role beyond its mandate, Fed watchers said on Monday. The Federal Open Market Committee (FOMC) is meeting on Tuesday amid widespread market expectations it will lower the 5.50-percent federal funds rate by at least 25 basis points. "(Fed Chairman Alan) Greenspan is trying to show an element of leadership in global financial markets at a time when nervousness and uncertainty is at an extremely high level," said Daiwa Securities America chief economist Michael Moran, who noted the absence of global initiatives to solve global financial markets' woes. INTERNATIONAL EVENTS' SPILLOVER FEARS "Greenspan is feeling such an intense sense of pressure from around the world, he concluded he has to take the lead," said Moran, who acknowledged the U.S.-only case for an easing was not overwhelming at this stage. Greenspan, mindful of the Fed's domestic mandate, detailed the U.S. rationale for an easing, telling the Senate Budget Committee last week "the most recent more virulent phase of the (international) crisis had infected our markets as well." "The Fed may be attempting to do more than it should be doing. I don't think it's going to solve the problems of the world but I don't think it is going to hurt the U.S. economy," Daiwa's Moran also said. "They are not going to solve the problems in Asia, simply signal they are aware of the problems and watching closely." A Fed source told Reuters the key to Fed policy under Greenspan "is not to seek the optimal policy, but the policy that presents the least risk of causing damage if wrong." The source said the Fed has room to ease because the odds of a U.S. inflation flare-up were currently very low "whether the Fed cuts rates a little bit or not." The source also noted it had been difficult for the Fed in the past to estimate the impact of a rate move on financial markets. FOMC minutes have repeatedly cited concern about a possibly "outsized" market reaction to a rate change. THE FED AND CONCERN OVER FINANCIAL MARKETS' LIQUIDITY Former Fed governor Lawrence Lindsey warned in an opinion piece in the Wall Street Journal on Monday "the global effect of feeding the American equity bubble is even more problematic." "Global investors now have every incentive to allocate even more money to 'fully valued' American equities. That means less capital in high-risk areas like Asia and Latin America, making their recovery even more distant," Lindsey also remarked. Talk of a Fed easing is rising as financial markets around the world, including U.S. high-yielders, are seeing their financing channels dry up amid renewed risk aversion widening most spreads. These issues were highlighted last week by the last-minute rescue of the troubled hedge fund Long-Term Capital Management. "The Fed cannot solve the world's problems. But an easing would be an important gesture at a time when there has been a sudden retreat from risk-taking and massive deleveraging," said Nomura Securities International managing director David Resler. "The hope is that people would be less averse to lending to market players because there is no other central bank in the world that is willing or able to prevent a financial implosion," Resler added. MARKET MAY LEAD THE FED AGAIN AS IN 1994 Traders said one risk the Fed may be facing is that the Treasury market will take the lead in monetary policy by pricing in more easing than the Fed intends to implement. In February 1994, FOMC members were stunned at the abrupt Treasuries sell-off sparked by an initial 25-point hike -- the first in five years. The long-bond yield went from a then-record low of 5.75 percent to a high around 8.0 percent in just one year and did not stabilize until the Fed resorted to a bold 75-point hike in November 1994. "What is very difficult for anyone to guess is whether the Fed easing will calm markets or fuel a fresh Treasury market rally that could further distort spreads," one trader at a European brokerage firm said. "That's why the market will be particularly careful about the wording of the Fed's announcement to get a sense of future policy," the trader added. The FOMC'S decision is expected to be released on Tuesday around 1415 EDT/1815 GMT. 14:51 09-28-98 - - ------------------------------ Date: Mon, 28 Sep 1998 22:37:15 -0400 From: "Frank V. Wolynski" Subject: [CANSLIM] A Killing in Stocks! Literally! Just too weird! FVW - --------------------------------------- Former Fuji Bank Employee Admits Killing Couple to Hide Losses Tokyo, Sept. 29 (Bloomberg) - A former employee of Fuji Bank Ltd., Japan's sixth-largest nationwide lender, admitted to killing two elderly clients at their home in Miyashiro, Saitama prefecture, to conceal losses on investments they had entrusted to him, the Mainichi Daily News reported, without citing sources. Terumitsu Okafuji, 32, said in court that he strangled Jiro Fukuda, 74, and his 64-year-old wife, Tsune, after he lost 2.5 million yen of the couple's money. The lost funds came from 5.7 million yen that the couple had given him to deposit in an investment trust company, the report said. Top Japanese banks including Fuji Bank were implicated in an entertainment-for-favors scandal earlier this year; prosecutors suspect executives of private banks wined and dined Bank of Japan officials in return for information on which banks would be audited and when. (Mainichi Daily News, 9/29, P.16) 20:33:25 09/28/1998 - - ------------------------------ Date: Mon, 28 Sep 1998 21:38:56 -0700 From: Dan Cash Subject: [CANSLIM] Japan Last week Frank forwarded an analysis of the needs of Japan and the needs of Clinton in their upcoming meeting. Enclosed is a followup from same source: Global Intelligence Update Red Alert September 29, 1998 Obuchi Refloats Idea of Asian Monetary Fund President Clinton clearly resisted the temptation to play the savior last week, sending Japanese Prime Minister Obuchi home empty handed. Whether Clinton was showing extraordinary good sense, was relieved at public reaction to his Grand Jury testimony, or was hemmed in by Federal Reserve Chairman Alan Greenspan's refusal to countenance a coordinated interest rate cut is immaterial. Clinton resisted. Interestingly, Greenspan then went on to announce the likelihood of interest rate cuts, which buoyed world markets without decreasing pressure on Japanese banks. The consequences of Obuchi's failure to extract American help started to appear Sunday night, as Japan Leasing Corporation went bankrupt -- over $16 billion in debt and with no hope of recovery. The hopelessness of its situation was made clear in Japan's Diet, which finally hammered out an agreement that appeared to have some possibility of lasting longer than a day. The agreement saw the Japanese ruling LDP abandon its position that government funds should be used to save ailing financial institutions. In a compromise with its opponents, the LDP agreed that funding would be provided to buyers of ailing banks, but not to the banks themselves. In other words, depositors would be saved, along with some investors, but the management of the banks would be punished. With all hope lost, Japan Leasing, a subsidiary of the ailing Long Term Credit Bank of Japan, went under. Japanese markets actually rose on the news, relieved that the blood-letting was about to begin. In the midst of this excruciating process, the Japanese leadership is desperately searching for a policy to call its own. Recognizing finally that Japan's problem and Asia's are one and the same, Japan is refloating a potentially historical idea. According to Japan's Kyodo News Service, Japan will propose at the upcoming G-7 meeting that an Asian Monetary Fund be organized. According to Kyodo, which is usually well informed, Japanese diplomats are now in the process of coordinating with other Asian countries to present a coherent framework. This idea was proposed previously by Japan and other Asian countries, but was rejected by the United States. Obuchi seems to have decided that if Clinton was not prepared to help Japan, then Japan was under no obligation to remain within the American conceptual framework. The basic idea of an Asian Monetary Fund is the same one that underlies the International Monetary Fund. Asian countries would pool their remaining foreign reserves and use that war chest to defend the currencies of weaker countries when faced by sudden and unexpected outflows of capital. This is the role that the IMF is supposed to play. However, IMF funding usually comes with strict requirements, including budget cuts, closing failing financial institutions, writing off bad loans, and opening markets to foreign competition. In this sense, the IMF is increasingly seen by Asia as an American tool, used to pry open closed markets and destabilize potential competitors. Since the Japanese are not getting much direct help from the U.S., and since the IMF has become increasingly suspect throughout the region, an Asian Monetary Fund has become an increasingly important idea. It would be expected that it would provide funds without the onerous requirements of the IMF. This would mean that the existing social and economic structures would not be destabilized. In other words, an Asian Monetary Fund would do what the IMF does without the toll that IMF help exacts. Of course, there is more than a bit of fantasy involved here. All of Asia is in financial meltdown and monetary reserves have drained out of the region. The idea that Asia can collectively protect their currency, where not one of them has been able to do so, is arithmetically dubious. First, it assumes that there is a reserve to draw on. Second, it assumes that financial imbalances will courteously queue up, allowing a limited asset to be sequentially allocated. Finally, it assumes that stronger nations will willingly pool sufficient cash to protect weaker nations, in spite of the fact that this will increase their own vulnerability. In spite of these obvious weaknesses, the idea has a growing body of supporters in Asia. It is a logical expression of the growing Asianist bloc in the region. It also is said to have some American supporters, like Paul Volcker, former Federal Reserve Chairman, whom former Prime Minister Miyazawa claims is in favor of it. It is certainly not something entirely against U.S. interests, since it forces Asia to clean up its own mess and excuses the U.S. from any action. In the long run, however, an Asian Monetary Fund has profound implications. Given its obvious weaknesses, such a fund could not function in the short-term without some degree of regional currency control. For the reasons given, the AMF could not, by itself, stanch the outflow of money from a major country, like Korea. However, its infrastructure could serve as an instrument for the administration of regional currency controls. If that were done, short-term fluctuations could be avoided, while the reserve fund could be organized as an Asian version of the Eurodollar to facilitate regional trade. It is extraordinary how far we have gone. Japan, which has eschewed regional political leadership and which has benefitted most from Breton Woods, is now essentially moving to create a yen bloc. We suspect that this is not what Obuchi really wants. By leaking that he is planning to offer the proposal at the G-7 meeting, he is trying to warn the United States of the consequences of its unwillingness to help Japan. As a bluff it is unlikely to work. A massive U.S. bailout of Asia is not going to happen in the current American political climate. Therefore we are in a classic situation where a desperate bluff may well turn out to be policy. Since Japan and the rest of Asia cannot genuinely restructure their economies without being willing to endure social upheaval, they are going to trade long- term recovery for short-term stability. This has been their policy all along. It is a policy that has so enervated their economies that the only way to maintain their dilatory policies is with a modest step with radical implications. If Asia creates an Asian Monetary Fund, it will not stop until it creates an Asian currency bloc under Japanese leadership. When that happens, and we believe it will, the very texture of the international system will have changed irretrievably. We are entering a world of regions, replacing the much-vaunted global economy. ___________________________________________________ To receive free daily Global Intelligence Updates or Computer Security Alerts, sign up on the web at http://www.stratfor.com/mail/, or send your name, organization, position, mailing address, phone number, and e-mail address to alert@stratfor.com ___________________________________________________ STRATFOR Systems, Inc. 504 Lavaca, Suite 1100 Austin, TX 78701 Phone: 512-583-5000 Fax: 512-583-5025 Internet: http://www.stratfor.com/ Email: info@stratfor.com - - ------------------------------ Date: Mon, 28 Sep 1998 22:14:21 -0400 From: "Frank V. Wolynski" Subject: [CANSLIM] Bloomberg Business Report - Interesting Reading I found this tonight and thought since the current discussion was on tomorrow's big, whopping, gala event, "RATE CUT", I would post it. It is a very interesting treatment of the subject. Frank Wolynski - ---------------------------------- After the Fed Cuts Rates -- Then What?: Maggie Mahar New York, Sept. 28 (Bloomberg) -- Tomorrow, Alan Greenspan is scheduled to save the world. The pressure on the Federal Reserve Chairman is immense. If he fails to announce a much-awaited interest rate cut, the shock would rock stock markets 'round the globe. Most observers are convinced that he will deliver, but questions remain: Will it be a cut of 25 basis points? Fifty basis points? Will this be is the first in a series of cuts? Leaving aside questions of whether he will or he won't -- and by how much - -- there's one question I can't help but ask: ''What good will it do?'' The problem facing Western markets isn't that interest rates are too high, but that prices and profits are too low. Stock markets in Europe and the U.S. have been plummeting on earnings reports. Would lower rates boost earnings? ``Absolutely not,'' says Ken Goldstein, at the New York- based Conference Board. ``We've already had the monetary stimulus of low rates -- we've seen the long bond approaching 5 percent. And, with the cost of commodities sliding, we've had the fiscal stimulus of lower prices.'' Turmoil If anything, a U.S. interest rate cut could add to the turmoil at home and abroad. In theory, if the Fed cut rates, both consumers and companies would borrow more and spend more -- stimulating the economy. U.S. consumers are already spending freely -- personal spending rose by 0.6 percent in August alone while personal income jumped 0.5 percent. Meanwhile, the savings rate is at an historic low -- under 1 percent. How much more could consumers spend? The problem for manufacturers in both the U.S. and Europe isn't that shoppers are buying less, but that they're paying lower prices -- and buying more foreign goods. And the price of those foreign goods -- mainly Asian -- continues to drop. ``Import prices for August were down 6.4 percent over August '97 -- up from a 5.6 percent decline in July,'' says David Orr, chief economist at First Union's Capital Markets Group. Meanwhile, imports from Asia last month climbed 12.8 percent year-on-year in terms of volume, Orr points out. By the same measure, imports from Japan are up 6.3 percent. Inflation That's one reason earnings aren't growing at the double- digit rates needed to sustain stock prices. But the fact is, says Orr, you can't expect to have both low inflation and double-digit profit growth: ``If you manage to maintain the good news on the inflation front, you pay for it with lower profit margins. In the real world, you can have 1 1/2 percent inflation, but profit margins fall. The market has been pricing stocks as if you could have both -- and that's just not tenable.'' ``The stock market could easily go down by another 10 percent,'' Orr predicts ``I wouldn't be surprised if it dropped by 25 percent.'' But that's precisely why we need interest rate cuts, say the advocates. As share prices slide consumers will feel poorer - - and spend less. (Who knows, they might even save.) Charge It! Yet it's not clear how the Fed could fill shopping malls. An interest rate cut is not like a tax cut - it doesn't put money in citizens' pockets; it just makes it easier to use credit cards. (At best, those who refinance their mortgages would wind up with extra cash, but in most cases, the transaction costs of refinancing a $100,000 mortgage will eat up the first year's savings.) But wouldn't lower rates spark the housing market by making mortgages more affordable? ``With mortgage rates already anticipating a Fed ease, there's no reason to expect that an actual ease would change the housing picture,'' says Orr. Indeed, he points out, housing is already booming: ``Economists talked about the housing market `slowing' only because `August was 5.5 percent below the virtually unheard of level of 1.71 million in July. In fact August housing starts of 1.51 million were, by any reading of historical data, very high. ``Going forward, even if starts stay close to these `boom' levels, they will not contribute to GDP growth,'' he adds. The commercial real estate market also appears to be peaking. Is that because developers can't borrow enough to build more? Not according to the Office of the Comptroller of the Currency. Earlier this month, the OCC warned terms for real estate loans are already getting too loose. Of the banks it surveyed, it found 43 percent had relaxed standards for real estate loans, while only six percent had tightened. The OCC also cautioned that the level of risk on credit card and other types of consumer loans has climbed to perilous heights. Indeed, in the U.S. easy money may be part of the problem, not the solution. Hold the Espresso In theory, lower rates will allow U.S. companies to borrow more and expand their business, but there's little evidence that what's crimping profits is a lack of investment capital. To the contrary, signs of over-capacity in industries ranging from chemical and steel to autos and micro-processor are mounting. As for smaller businesses, bankers have been generous to a fault suggested the OCC, naming ``loans to mid-sized businesses'' as an area where standards have loosened. We just don't need more micro-chip factories -- or more coffee bars. Where liquidity is needed, of course, is in emerging markets. But the credit crunch there was created by the market, not central bankers. And even a 50 basis point cut won't send either lenders or investors rushing to pour money into Indonesia, Korea or Brazil. If Treasuries pay less, investors might consider taking a risk on corporate debt -but the opportunity to make another 1/2 percent won't persuade risk-adverse portfolio managers to buy bonds in Brazil Nor would a U.S. rate cut lighten the burden significantly for Asian countries carrying dollar-denominated foreign debt. Again, the problem is not that the interest rate on the debt is too steep -- but that they're trying to repay in devalued currencies. Granted, if a rate cut were big enough, it might push the dollar low enough to make a difference. But a weak dollar would create other problems for exporters in Japan, Brazil -- and even in Europe. Suddenly, their exports would no longer be as cheap. Psych Out By far the strongest argument for Fed action is psychological -- a rate cut could boost the confidence of markets worldwide. But trying to fine-tune the markets' moods is a tricky business. (Playing with people's heads is always dangerous.) Tomorrow, for example, I suspect that Greenspan will announce a cut of just 1/4 percent -- and markets will be bitterly disappointed. Trouble is, share prices have already moved up on the expectation of Fed action. If Greenspan promises less than 50 basis points, my guess is that ungrateful markets will tumble. And by trying to do more, the Fed might only stir up the pot, creating more uncertainty at a time when the financial world is already in flux. For it's impossible to predict what effect a '98 rate cut would have six months done the road -- when any real impact would be felt. That's why Euro bankers refuse to consider the idea. The debut of the Euro is their first concern - they can't afford any more uncertainty. (Nor can the world.) Managing the Bubble The problem in the end is the Fed has put itself in a position where it's expected to manage the world economy. ``and now it's in the business of bubble management,'' says Jim Grant, editor of Grant's Interest Rate Observer. ``Risk has been over-priced, credit has become ever more abundant and cheaper. A Fed funds rate of 3 percent was the starting pistol,'' says Grant. ``And as long as the Fed funds rate was set low, it was an effective narcotic.'' ``Now the Fed is appalled at what it helped to create -- excess speculation - -- and it's supposed to help the real economy without re-igniting the boom. '' Try to imagine a bubble collapsing in an orderly fashion. 15:04:31 09/28/1998 - - ------------------------------ Date: Tue, 29 Sep 1998 08:17:27 -0700 (PDT) From: rolatzi Subject: [CANSLIM] Not: delayed quotes nice web page A very useful delayed quote, chart, delayed live transactions. Check it out. http://www.quote.com/cgi-bin/jchart-form?genApplet=yes _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ Date: Mon, 28 Sep 1998 18:30:42 -0700 From: Tim Fisher Subject: Re: [CANSLIM] Quiet 95%+ IN. Creamed the indices today. One stock out of 10 I own went down since last Monday when I juped back in. Scared shitless about tomorrow. At 09:56 PM 9/28/98 +0200, you wrote: >It is so quiet here, it is scarry... > >B^) > >P.S.: Chicken little here toke profits and is back to 100% cash. I wonder >what our group members have and are doing protfoloio-wise... > > > >Johan Van Houtven / CLICK! N.V. > Tim Fisher, 1995 President, Pacific Fishery Biologists Ore-ROCK-On Rockhounding Web Site PFB Information mailto:tim@OreRockOn.com WWW http://OreRockOn.com - - ------------------------------ Date: Wed, 16 Sep 1998 11:45:07 -0700 (PDT) From: dbphoenix Subject: [CANSLIM] NonCANSLIM--Broker Query Would anyone who's had experience with Web Street Securities please contact me directly? - --Db _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ Date: Tue, 29 Sep 1998 08:48:15 -0700 From: "Joe Barger" Subject: [CANSLIM] Volume Info. Does anyone know of a source (preferably free) that provides realtime (or delayed) percent volume change from the previous day or from a moving average for the major indices (perhaps on an hourly basis)? I'd like to get an idea of how the volume during the day stacks up against the previous day or some average. The same info for particular stocks would be useful also. Thanks joe - - ------------------------------ Date: Tue, 29 Sep 1998 09:44:56 -0700 (PDT) From: dbphoenix Subject: [CANSLIM] CBTSY From Briefing.com: CBT GROUP PLC (CBTSY) 11 1/16 -4 1/8. The recent earnings warning and collapse of CBTSY shares are providing an important lesson to investors: The "rogue" analyst is usually the one worth following. Investors who purchased shares of this educational software company following reassuring comments two weeks ago by Piper Jaffray and BT Alex. Brown understand what we are referring to. Story: CBTSY shares tumbled 28% from $55.375 on September 14 after Hambrecht & Quist analyst Genni Combes voiced concern that the death of a key official's son could cause delays in closing contracts in Europe. Reassurance: Piper Jaffray reiterated its "strong buy" rating, stating it had not seen any changes in the company's performance guidance to prompt an alteration to its viewpoint and based on management's confidence in fundamentals, Piper believed that the stock's decline presented a good buying opportunity. Although BT. Alex. Brown did cut its rating (from strong buy to buy), the firm emphasized that it fully expected CBTSY to meet Q3 and FY earnings estimates of $0.22 and $0.87, respectively. Credibility Lost: Yesterday, after the stock had already tumbled almost 9 points, CBTSY announced that due to softness in orders for September and failure to close a $5-$6 million order, revenues and earnings for the third quarter would be below analyst expectations. The warning has prompted BT Alex. Brown to lower its Q3 earnings estimate from $0.22 to $0.15 (-32%) and reduce revenue projection from $51 mln to $44 million. For fiscal years 1998 and 1999, Alex. Brown goes from $0.89 to $0.77 (-14%) and from $1.25 to $0.95 (-24%). Alex. Brown now believes that a 25%-35% growth rate might be a more appropriate benchmark versus the 40% rate it forecast two weeks ago. Piper Perturbed: As for Piper Jaffray, the firm appears to be quite disenchanted with CBTSY management. Not only does it slash its rating from "strong buy" to "neutral," but the firm chops its Q3 EPS estimate from $0.23 to $0.08 a share, a 65% reduction. Piper lowers its Q4 view from $0.34 to $0.24 (-29%). The firm points out that CBTSY failed to give any guidance on estimates. Says that near-term upside is limited until the company reports and speaks with analysts. _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ End of canslim-digest V2 #396 ***************************** To unsubscribe to canslim-digest, send an email to "majordomo@xmission.com" with "unsubscribe canslim-digest" in the body of the message. For information on digests or retrieving files and old messages send "help" to the same address. Do not use quotes in your message.