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Technology Stocks : Intel Corporation (INTC)
INTC 36.78+2.7%Nov 26 3:59 PM EST
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To: Road Walker who wrote (128445)2/28/2001 7:53:03 AM
From: GVTucker  Read Replies (1) of 186894
 
John, RE: Demand exceeds supply. This is obviously not a current problem. And I think the systemic changes in the economy, with production chasing the lowest cost geography, coupled with technology in manufacturing and overhead, has been the limiting factor in inflation over the last 10 years. I don't see this as a threat even if the economy picks up, too much JIT, superior manufacturing technology, and increasing ability to adjust to demand.

This is not so obvious to me.

I really think that over the past couple of years some large imbalances were created in our economy. The power crisis in California and high price of natural gas in general is a consequence of one of those imbalances.

Note that JIT is inflationary when compared to the old method of building inventory.

A potential source of another imbalance is in the paper industry. There is currently very little capital flowing into this industry, and capacity declined in the industry last year and will decline again this year, which is very similar to what happened with natural gas a year ago. It's possible that non ferrous metals fit into this category also.

I agree with you that the stagflation mentality is the greater risk. But don't be too quick to discount old fashioned supply and demand.

Greenspan and the Fed have a very difficult job facing them. Part of it is their fault, given the Y2K mistakes that caused the bubble in 1Q 2000, but most of it is out of their hands. What makes it even more difficult is that most people think that Greenspan can wave some magic wand and proclaim that the slowdown is over.
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