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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 652.56-1.5%4:00 PM EST
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To: Haim R. Branisteanu who wrote (23825)8/25/1999 7:01:00 PM
From: pater tenebrarum  Read Replies (2) of 99985
 
Haim, i agree with most of this...and i'd like to emphasize that the manner in which productivity and inflation data are calculated tends to overstate the former and understate the latter. what's more, the classic interpretation of inflation looks at inflation as the increase in money supply, not the increase in prices of goods and services. money supply has risen by over 200% in the last decade, far outstripping the increase in economic output. obviously the inflationary forces have been channeled into asset prices, which has led to the perverse situation of the stock market becoming the main driving force in the economy. i have no doubt that the easy monetary environment has already created malinvestment on a grand scale. an example of this misallocation of resources is the proliferation of new sports stadiums, the hotel building boom in Las Vegas and the tendency to erect ever more expensive mansions and residences. it's a boom built on a credit bubble - and as such doomed to ultimately fail. Greenspan is often heard wondering aloud about the astounding performance of the economy in his speeches, but a study of his writings dating from the 1960's suggests that he knows very well what is going on. believe me, the Fed and the administration both are scared to death over this bubble, and the Fed will be identified as the main culprit in letting it get out of hand by future historians. the market-cuddling statement that accompanied the latest puny rate hike really took the cake imo.

regards,

hb
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