Conference nyoss1::market_investing

    re: .0
    
    500% interest in Sweden and England "up by" 5%??? That would cause a
    market crash here in the US. But, I haven't seen anything like that
    happening just yet.
    
    Mike

That was CNN headline news lead in at the beginning of the half hour this 
morning and they followed it up at 15 minutes past the hour during the dollars
and cents segment.

    I believe Sweeden increased interest rates on overnight borrowings from
    about 15% to 75% during the week (thus the "500% increase" quoted by
    CNN).  This was in response to a currency crisis in Finland which lead
    to their devaluing the Finnish currency (Markka (sp?)) by something
    like 13% or 14% vs. the European Monetary System composite currency
    (EMUs).  What I've read indicates that Sweeden had to make a drastic
    defense of their currency (krona) to prevent devaluation like
    Finland's. The Swede's want to ensure their future alignment with a
    united Europe, and so need to show they're willing to tough out the
    current high-interest rate environment engineered by the German
    Bundesbank to deflate E/W German integration costs/speculation.
    
    As an owner of international stock and bond funds, I'm straddling the
    fence on this onw and now losing any sleep in the process!  From a
    news/economics standpoint, it's developing into a very interesting time
    in Europe.  Stay tuned...
    
    			JC

    
    perhaps European currency moves could precipitate a Wall Street crash?
    
    oh I hope so. then I can buy into the market. Much too pricey right
    now..
    
    
    Simon

    I think .3 is right on the facts and opinion, too.  There's a lot of
    confusion right now ahead of the French referendum on the Maastricht
    treaty which was -supposed- to define the process for converging on a
    single European currency, dominated by the strong German DMark.
    
    Trouble is, the various countries in Europe are in various stages of
    the business cycle.  Britain is deep in recession and wants lower
    interest rates to stimulate business.  Germany is suffering from an
    overheating economy and wants high interest rates to fight inflation.
    The Pound is -supposed- to trade, now, within a 6% band above or below
    some number of DMarks...I forget the exact figure, 2.8 or so.  Anyhow,
    the mere possibility of a French NO vote on the treaty would mean the
    process would be halted midstream and therefore there was some doubt
    that the British would want to continue supporting the Pound.  Thus an
    interesting line of reasoning:  "The French will vote NO, therefore the
    Pound will fall against the DMark, so SELL STERLING!".  This forced the
    UK, still at the time conforming to treaty accords, to take measures to
    support the Pound vs. the DMark.  First by open market intervention,
    then by raising rates to 12%, then (same day!) raising rates to 15% --
    boom, Boom, BOOM!  None of this worked, the Pound continued to fall in
    Europe and later in the USA.  Ironic, isn't it, that Britain had to
    raise rates at a time when they were looking to reduce them.  Finally
    Major & Lamont conceded defeat, dropped rates and elected to withdraw
    from the treaty provisions.  A midafternoon switch from the Swedish 
    approach to the Finnish, so to speak.  The Pound will be allowed to float 
    vs. the DMark instead of holding to a 6% band.  Once again, markets are 
    seen to be more powerful than governments.
    
    Sometime in the future we'll probably see a renegotiation of Maastricht
    and perhaps a more gingerly approach to currency unification.  Maybe
    the politicians will pay a bit more attention to the business cycle and
    try to lock steps there before tying currencies.
    
      John

    
    I have never been able to tell much about all this currency stuff.  It
    has always seemed to defy logic.  When I saw 500% my first reaction was
    ho hum.  Seems to me that it is a temporary move to position ahead of
    this weekends activites in Europe.  What I do look at is companies and
    their potential and I see potential for European investment tied to
    successfully transitioning out of recession in the US.
    
    From a European point of view it seems to me that the US economy will
    get itself together in 93 irrespective of who the winner is in
    November.  Bush and/or Clinton will inherit an economy with a primed
    pump.  When this thing takes off it will benefit not only US companies
    but foriegn companies as well.  I look for our next economic upswing
    to benefit especially the Germans.  A mutual fund would make since to
    spread the risk to a less than market decline should European markets
    have a significant pullback while they sort out the present currency
    differences.
    
    Rgds,
    
    JG

    
    If I had any spare right now. I'd be buying German bonds, even with
    exchange rate exposure. If I could find where to buy them without
    forking out too much in commissions, I'd think about German bond
    options in 3 months or so, on the theory that Bundesbank won't act now
    for fear of appearing that they are bowing to political pressure and 
    because they haven't tamed the beast (inflation) to their satisfaction
    yet, but that they will be forced to ease massively down the road.
    

    Sweden has now dropped the rate from 500% to 50%.  It was a real 500%
    (not five times the previous rate as one reply asserted), but only on
    over-night loans to the government.  It wouldn't be easy for an
    individual investor to get that rate, and longer-term rates didn't go
    up that high.
    
    Basically it was a bribe to currency traders, to get them to buy krona
    (kronur?) by paying them about 1%.  This was meant to prevent massive
    sales of krona which might have forced a devaluation relative to the
    German mark.
    			-John Bishop

    The 500% overnight was a way to _prevent_ currency traders from
    borrowing krona, selling them for marks and then buying them back later
    (in the day!)  at a hefty profit assuming that the krona would have
    fallen.

    You're right--I went back to the old issues of _The_Economist_ and it
    was a rate charged when banks borrowed from the Swedish equivalent of 
    the Fed's discount window, not a rate offered on deposits.  The article
    didn't mention whether any non-bank could borrow at that rate.
    
    So I had it backwards (on the other hand, I don't know (as it didn't
    say) what rate was paid on banks' deposits by the Fed-equivalent at
    that time, so it might have been raised as well).
    
    		-John Bishop

    To revive and old note ...
    
    Does anyone else out there feel as I do that things should be fine in
    the European stock markets for another few years? Then why are their 
    markets getting clobbered every time WE raise rates in the US ?
    
    Looking at it as an outsider, they are a few years behind us in the
    economic cycle. I would think rates will continue to decline for a year
    or two longer. So,... shouldn't this be good for the European financial
    markets ?
    
    Should I be happy that I can buy into a declining market and average
    down , or am I overlooking the fact that US investors will NEED their
    cash and will pull it out of international markets/mutual funds, etc ?
    

    I've been in a European fund for the past 6 months or more, using
    the same rationale as in .11 - it seems to me that though some of
    the details change, the basics of market cycles still hold true.
    I'd like to hear reasons to believe otherwise; I plan to add to my
    non-U.S. mutual funds and am considering further European investment.

    The rates in europe still are high and will come down, most notably the
    German rates. WHen they do, that should spur the european mkts (both
    stocks and bonds). Where as in the U.S, the rates headed higher (at
    least the short term rates) which should result in volatile markets.
    The way I see it, the U.S mkt going up is going to depend on earnings,
    while the european mkts working its way up will be interest rate driven
    (in the short term). 
    
    My $0.02 worth...

    
    
    I agree.  I have about 4% of my portfolio in the T Rowe Price European
    Stock fund.  Bound to be an up turn there soon.  The olny cautionary
    note is that with Germany (traditional engine of Eurpean growth) in the 
    doldrums, the wait may be longer than normal.
    
    Kaizad

    I personally prefer a more general Int'l stock fund (and I have with
    Scudder). The reports that I have read indicate that the Germans are
    going to cutting the rates this year.

    I agree with the last few , so ...
    Why are European markets following the U.S. markets down ?
    Greenspan raises rates here and Europe stock/bond markets go down.
    
    The $64 question - In spite of what SHOULD happen, 
    Do you stay invested in Europe although their markets are going down 
    with ours, OR
    Do you view this as an opportunity to average down in the European
    markets ,  OR
    Do you sell your European funds , taking what profits you have and
    put the proceeds in a passbook savings account ?
    
    To me it seems as though Europe has another year or two to go in their
    recovery. It seems as though the European markets are going down because 
    everyone is afraid that everyone else will pull their money out of Europe. 
    If enough people believe this, it will come true.
    
    P.S. I'm in the Fidelity International Growth and Income Fund which has
    been going down along with the US market. I had been in the Janus
    Worldwide Fund for the past 3 years or so, but I took my profits (while
    I still have them) last week. I don't feel so bad about selling my
    Janus WW fund now that things are tanking worldwide. (I made a great 
    return for 3 years - no complaints)