The Justa & Lars Honors Bob Brinker Investment Club Message Board

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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: Justa Werkenstiff who wrote (6284)	6/25/1999 10:01:00 PM
From: Ian@SI	of 15132

Justa, 1. Agree that the probability is that Greenspan will move in 25bp increments. Simply because he always has. 2. Removing the bias does not, in any way, restrict the Fed from taking whatever action they deem appropriate - tightening, easing or standing pat; and whenever they deem it appropriate. The market might overreact to a tightening while neutral. This is a new problem which Greenspan has created with his recent openness on immediately communicating the bias. But then we've already seen how the bond ghouls can overreact to having this incremental data point. Hopefully the newness of this toy will wear off very soon, and the ghouls will resume their normal degree of lunacy. +++++++++ Finally, I believe the likelihood of inflation is nil when Capacity Utilization is less than 81% as it is now. Tightening will, at the margin, stop decisions to add more capacity (the supply side). Excess capacity will disappear as demand continues to grow. This will, in turn, give companies pricing power; and lead to the inflation that Greenspan so desperately seems to want to avoid. What a delicate web we weave ... Ian.

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