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Author: MandBinc Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Expected Declines Date: 11/13/1999 6:45 AM
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If one expects to see a rate hike I would think that a sale of the Security, Bond or Fund, would be prudent. As the Interest rates rise the underlying price of those securities decline to the new level of interest rates. The proceeds of that sale can then sit in a Money Market fund, collecting the increasing prevailing rates, until the Bond Market Stabilizes. Once stabilized the same Bonds or Funds can be repurchased at a lower cost and a higher yield.

Of course this strategy will not always work, as the Fed unlike some other Central Banks, likes to keep their rate plans secret until the last possible moment.

Personally I expect the Fed to raise rates again next week. Not so much to battle inflation, which is still pretty much in check, but to restore the environment that was in place in 98 when the Fed acted to contain the Global Currency Contagion that was spreading. With rates back to where they were, the Fed should then be able to sit back and see if the economy is truly overheating. Depending on the Severity of the Winter and the impact of Y2K, the Fed most likely not do anything further, rate hike wise, until Spring 00.

As for reducing rates in the event of disaster, that is also not likely as the Fed has already said it would make cash available to Banks to cover any Y2K drains.

If you are interested in Global Economics and occasionally like good bedtime reading in lieu of Sleeping Tablets:

http://ms.com

This is the Link to the Morgan Stanley Home Page. There you can follow the links to the Global Economic Forum. It is Articles, Excerpts and Essays written by their Staff of Economists, led by Mr. Steve Roach. There is no charge but they do want you to sign in the first time and they drop a cookie on your PC. This means every time you visit from a PC that has not been there before you need to repeat the process.

I have not received any Junk Mail from them
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