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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Wally Mastroly who wrote (7207)8/2/1999 10:00:00 AM
From: Wally Mastroly  Read Replies (1) of 15132
 
As the bond market continues dropping...Garzarelli update - 30 July 1999:

garzarelli.com

News of the higher than expected employment cost index came at a vulnerable time for the markets. It increased 1.1 percent in the second quarter -- however, it is important to keep in mind last quarter's increase of 0.4 percent was the smallest ever. On a year-over-year basis, employment costs were up 3.3 percent -- not too high based on the past two years. Also, real GDP was reported this week, growing at only a 2.3 percent rate in the second quarter. Final sales were stronger, at 3.2 percent, suggesting the third quarter could see a rebound as inventories are rebuilt. The bond market rose to 6.06 percent (30-year yield) due to continued fears of a Fed tightening.

We do agree that the Fed is likely to raise rates at least one more time based on the CIBCR leading inflation index that shows the percentages of purchasing managers who reported higher buying prices (up from 52.2 percent to 53.5 percent) and longer delivery periods (up from 51.9 percent to 53.1 percent). We believe this (CIBCR index) is a key index for Greenspan (we highlight it each month in our newsletter).

However, even with another rate hike, we believe the stock market, over the long term, will be OK as bond yields start their decline and earnings remain relatively good.
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