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Technology Stocks : All About Sun Microsystems

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To: JDN who wrote (27145)	2/3/2000 12:13:00 PM
From: Alok Sinha	Read Replies (2) of 64865

There have been instances in the US and other parts of the world where strong growth has happened without much inflation (but that is certainly the exception). Japan in the mid to late 80s is an excellent example. What typically happens in such environments is that the equity markets (and real estate markets) go bonkers assuming it will last forever. Now this time may be different but the Fed is just trying to manage growth to what would be considered sustainable. You have to realize that while improving productivity and the Internet have kept the lid on inflation, most of the strong GDP growth is coming from consumer spending (which in turn appears to be financed by borrowings and higher equity markets- the savings rate continues to hit record lows). The Fed simply dosen't want growth in the economy to be primarily driven by higher stock prices and borrowings, since it encourages speculation, risky borrowing (increase in margin debt is another evidence) and the downside risk is much greater if the bubble burst. Charles, I was really impressed by our excellent discourse on rates. The wine probably contributed to the free flow of ideas. Alok

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