Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: SliderOnTheBlack who wrote (65511)	5/1/2000 7:33:00 AM
From: jim_p	Read Replies (1) of 95453

Slider, I think there is no question that the Fed has fallen behind the curve on inflation, and given the results of the last Fed meeting, the pressure to catch up is rapidly intensifying. I would conclude that the chances for less than a 50bp rate increase are very slim for the following reasons: 1. It is clear that Fed rate hikes to-date have not slowed the economy, nor had much impact on consumer and investor sentiment. 2. The recent GDP, PCD and ECI numbers all confirm without question that what we have feared was going to happen for some time, has now happened. The ECI numbers are much worse than they appear when you factor in benefits, which are not included. The ECI numbers will be the knockout blow for the Fed. 3. Money expansion and the wealth effect have increased consumption to a level that can not be sustained. Real domestic demand growth grew at an 8% rate in the first quarter. 4. Consumer sentiment is still sky high. 5. Employment prospects are still excellent, and there is little fear of an end to the financial wealth boom that has taken place. If the Fed does not act quickly, the only solution to the problem is rapidly becoming a that a recession will be the only recourse to return the economy to price stability. This will most likely led to a bear market. If the Fed does act quickly (as it should) the chances that the market will crack are very high. So we are in a lose or lose position as a result of the Feds failure to respond timely and as a result of monetary expansion that was clearly unjustified over the last two years. The real question for those who have been here before is what impact that will this have on the oil patch. My only comparison would be the 70's, when oil induced inflation led to a recession and oil and gas (and gold) stocks were the only stocks that did well in what was then a bear market. I do fear a crack in the market, but my mouse finger is pretty fast, and I think it will be temporary and create opportunities. I would be interested in other peoples thoughts of staying investing in the patch at a time when the economic events to follow have become fairly clear. I have lowered my margin down to 35%, but I am still more than 100% invested in the patch. Jim

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