Subject: Re: Questions

From: [email-masked] (Yixin Luo)

>                       Subject:                               Time:4:18 PM
>  OFFICE MEMO          Questions                              Date:12/20/94
>
>The market has been declining in last few months. I'd like to ask some
>questions to the experts on the net.
>1. Is the raise of interest rates by the Federal government the major reason?
>What are the other reasons?
>2. When interest rates change, what kind of consequences should investors
>expect to see in different industries? It would be great if someone can give
>some introduction on the relations among industries.
>3. How would the change of interest rates in US affect the economy in other
>areas?
>Thanks. Tao

#1  Interest rate does contribute  heavily to the recent decline of  the US
stock market, there other reasons as well,  the year end stock sellout due
to tax purposes, the profit taking after a long   bullmarket...

#2  When interest rate goes up,  more people sell their stock and put their
money into bond market
because the bond yield goes up with the interest, stock market as a whole
takes a down trend. Those companies (many utility companies for example)
that have lots of long term debt have to pay a higher interest, their stock
is going to get affected more than others.  Industries rarely interacts
with each other, if I read your question rit,   a takeover in software
companies for example may cause a uptrend in that sector, but will not
affect, say, the semiconductor sector(even if you can reason that they may
be related to each other).

#3 the fluctuation of US interest rate is going to affect other contries,
especially those who have close ties to the economy here, mexico for
example.   But whether the mexico fund will go up or down tomorrow is
really hard to tell because the relation is just too indirect.

#4 where is the disclaimer?

Yixin  Luo
Pharmacopeia Inc.
(609) 987-1086
[email-masked]