Meltdown-First Wave

[berlin at socrates.berkeley.edu]

Yeah... I earn almost precisely what I spend right now (plus my paycheck
got cut 25% even though we were only on strike 4 days last month, during
which I was scheduled for only 1 day of work, and then the union isn't
going to give us strike pay because they only do that if the strike lasts
longer than 7 days). so I don't have any money in stocks, but an attorney
acquaintance of mine sold everything he had this morning. I don't think
that this is really the 'meltdown' that is starting right here because
there are too many factors to the contrary. I've been pondering who
exactly is buying all these internet stocks. My intuition tells me that it
is newbie speculators who have been participating in the stock market
since the past two years, who probably don't even read about overseas
currency devaluations. You'd be surprised how many college students I see
in university computer labs fiddling around on etrade. But I don't think
that that set of people really has enough cumulative capital to account
for it all. 

_______________________________________________________________

The January effect fizzled within 2 weeks of the new year.
Last night, while most in America was still deep in their dreams of
perpetually rising stock markets, equity markets on the other side of
the globe began its first wave of meltdown in 1999.
As I am typing (9:42 am EST) both the DJIA and the NASDAD are down by
triple digits and falling.  The futures markets have already caused
bankruptcies worldwide.  The high yield (junk) bond market is being
battered.
Brazil's Bovespa has dropped 10% after opening for 15 minutes and is
closed for trading for 30 minutes.
Many DJIA stocks are yet to open.
As Brazil goes, Washington's line of defense would have to be redrawn.
Greenspan is en route in mid-air back to Washington from Beijing where
he had been selling calm and confidence that everyone was politely
listening but no one believed.
A bloodbath has began and all your IRAs will be worth 10% less by 4 pm
today.

Gerald Seib, in his WSJ column: Capital Journal (Jan. 13. 1999) written
and filed a few hours before the bad news, analyzes why the the stock
markets seem relatively immune to the political crisis of impeachment.
He ends with the observation that "to the extent impeachment seems to
paralyze Washington and ensure continuation of the policy status quo, it
actually is adding to the markets' security....... how the marriage of
markets and has changed."

It his observation is accurate, there is not much Washington can do to
stop the latest meltdown this time.

Henry C.K. Liu