Joan, it is important to remember that while there IS value to be found in the market, it is only value under the premise that the economy's expansion will NOT fall apart. i personally think it eventually will, and the bursting of the Nasdaq bubble may be the first step.
as Bill Gross correctly pointed out today, the Fed is in a bind here. in '98, we had the danger of deflation looming, and it was conceptually easier to cut rates and flood the system with liquidity (even though i think it was WRONG! <g>).
now we have a dangerous acceleration in inflation...which is a direct result of the Fed's incessant pump priming. certainly the extreme leverage in the system could ultimately make for a return of deflation, IF the whole house of cards collapses. but as for now, the ECRI future inflation gauge and the NAPM reports have been screaming bloody murder on inflation for months on end. of course those are not government surveys, which due to their dubious methodology have so far managed to cloud the true inflation picture.
so the choice for the Fed is stark: either try to save the bubble, and thus risk that inflation seeps finally from assets into goods and services (the statist 70's solution), or try to stop inflation in its tracks and risk a complete meltdown in the process...
sorry Al, probably no soft landing...
regards,
hb |
