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Right on....this is the "new" FOMC methodology.....they "scare" the bond
market lower (rates higher).....then just meet that new "market" level.
This prevents the 1987 catastrophe.....which Greenspan is fully aware can be
easily be repeated with the stock market extended the way it has been. Any
surprises.....a WHAM...everyone hits the exit door at once.
The trick is knowing WHEN Greenspan will start "talking" the scare talk.
> -----Original Message-----
> From: Lawrence Chan [mailto:stnahc@xxxxxxxxx]
> Sent: Monday, January 03, 2000 9:43 AM
> To: OmegaList
> Subject: Re: new yr give away Was: Bonds tanking
>
>
>
> maybe we can perceive the issue this way,
>
> Fed board members want to keep their jobs, so they do
> not want to do something too drastic like what they did in
> 1987 and before. Thus they just react :)
>
> Before 1988, there is no such lead of 3 months behaviour.
>
> -Lawrence Chan
>
> ----- Original Message -----
> From: Andrew <warlord@xxxxxxxxxxxxxxxxxxxx>
>
>
> > At 09:01 AM 1/3/00 -0500, Lawrence Chan wrote:
> > >Anyone has all the historical rate hike data?
> > >I got not much, about past 20 years.
> > >Since the crash of 1987 ... The Fed always follow what
> > >the bond market do with a discount - with a lead of at least
> > >3 months.
> > >i.e. if the bond sell to a new lower level, Fed will rate hike.
> > >Fed wait to see if the bond "stay" at a level before adjusting
> > >their rate to the new level!
> >
> > 1. Market perceives Fed will hike, bond dives.
> > 2. Fed perceives Market going for higher long term rates, Fed follows.
> >
> > Offhand, I think it is impossible to discern between the two
> hypothesis??
> > At least using just price data alone. (Even with my lower "standards"
> > of rigour, I take natural experiments as establishing causal
> relationship)
> > Any challenge to this position much appreciated.
> >
> > I remember reading a wire a couple of years ago. It went something like
> this.
> > The S&P floor traders said they saw the dollar rallying and bought the
> S&Ps.
> > A couple of lines down ...
> > The fx market said they saw the S&P rallying and they bought the dollar.
> > Was a good laugh. Unfortunately, I did have the sense to print out the
> article.
> >
> > How about bonds tanking and commodities rallying as the business cycle
> > topping out?
> >
> > B4 I forget.
> > Happy New Year all.
>
>
>
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