Big Al & Larry From Chicago To Speak Tommorrow...

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Big Al is speaking at some bullshit thing tommorrow as is Larry From Chicago (Chitown Fed Pres). Larry's speach will probably be the more intersting as he's focussing on Y2K and banking. Big Al on the other hand is probably still trying to figure his way out of the current pickle he's in.

Here is an excerpt from a recent Barron's article which I think quite nicely sums up the issues at hand. For your own insight, Bianco is as good as it gets in terms of research.

From Barron's December 6th Issue, Alan Ableson is the author....for educational and research purps only:

....And we're indebted for that precious piece of knowledge to Jim Bianco's latest musings on Y2K. Jim, who's the main man at the cleverly named Bianco Research, notes that most people view Y2K and all that as a big yawn. Nonetheless, he notes, the standard advice from the sages is to stcokpile about two weeks worth of salary in cash, along with a stashh of dog food (which, if worse comes to worse, you can consume, even if you don't have a dog) and as much gas as your jalopy can handle. And the rising demand for such just-in-time cash has been something the Fed is being forced to deal with.

More specifically, that august agency has been flooding the system with money. Accordingly, Jim reports the adjusted monetary base in the bast 13 weeks has been growing at an astounding 18.95% annual rate, the fastest in at least 15 years.

Let's suppose Jan 1, 2000, comes and goes with no problems. Besides a cupboard full of dog chow and a full tank of gas, Jane and ohn Doe find themselves with a wad of extra cash on their hands. Well, Jim assures, that dough is definetely not going back into the bank. Instead, Jand ena John will do their honest best to make the "turn boom" come true.

So chances are, as in every past instance of the Fed's pumping money into the system to ease a crisis (October 87, the Asian Contagion), the result will be a fillip to the economy. Which is just waht the Fed doesn't want, so it'll have little choice but to tighten further. Alan Greenspan's lot is not a happy one.

Here's a different article in which the author pre-supposes that the flood of issues in the bond market is actually based on sound fundamentals. I would argue that the reasons for these corporations to get their financing done, is simply: They would like to complete these in the current low rate environment thereby avoiding comming to market in Jan and taking advantage of the Fed's current hamstrung position.

Mr. Levy feels otherwise, but I think he's a bit cloudy on his assumptions.

From Barron's December 6th Issue:

Bugged by the Millennium? Not the commercial mortgage crowd. by John B. Levy

Shruggin off the Y2K jitters of just a shorth while ago, the market for commerical mortgages is closing out 1999 with a rush of activity, according to the Barron's /John B. Levyy & Co. Naitonal Mortgage Survey of more than 30 industry participants. Lenders and issuers of commercial-mortgage backed securities are frantically trying to close additional transactions by the end of December, seemingly dismissing any threat of computer glitches fouling documentation over the turn of the year. To be sure , a few Y2K naysayers are sitting on the sidelines husbanding cash, but they're the minority. Many mortgage orignators are openly willing to close new deals up untild Dec. 31. The tone in the CMBS market has sharply improved and, as a result, spreads - the gap between the securities yields and those on Treasuries of comparable maturities - have tightened signifigantly, especially for the senior tranches. Additionally, for the past two weeks,......

The logic in this article is completely ridiculous. Levy says that he believes that bond issuers are confident and that's why they're cramming their issues into 99? By doing this, they may avoid "glitches fouling transactions over the turn of the year"? Nah, I'd say they are scared of having to explain to someone why they waited to issue when everyone knew rates would be going up NEXT YEAR (not this year) and doubling thier risk of problems by waiting until Y2K hits...but that's just my dumb opinion. I don't know much bout these hear financial thingys. Duh!

-- Gordon (g_gecko_69@hotmail.com), December 06, 1999

Answers

Big Al? Larry from Chicago? Who are you referring to?

-- (perplexed@wondering.com), December 06, 1999.

Big Al is Alan Greenspan, chairman of the Federal Reserve.

Larry Moskow is the Chairman of the Chicago Fed.

If you don't know what the FED is you should really spend some time to learn how your country actually works.

Scratch that, just keep prepping.

-- Gordon (g_gecko_69@hotmail.com), December 06, 1999.


Gordon: we don't all live in North America. No, really.

-- Colin MacDonald (roborogerborg@yahoo.com), December 07, 1999.

Big Al?? It sounds like your talking about a gang or the mob! Heh, well, I guess you COULD call the .gov a crime family...

-- Crono (Crono@timesend.com), December 07, 1999.

Government IS organized crime. When you finally become an unequivocal GI in that regard, almost everything you read and hear about economics and politics will start to make sense.

-- A (A@AisA.com), December 07, 1999.


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