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Politics : Formerly About Applied Materials

AMAT 242.41

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To: Proud_Infidel who wrote (44098)	3/20/2001 8:40:22 PM
From: Ian@SI	Read Replies (1) of 70976

Brian, Agree that money has been exceptionally tight; and, IMO, for far too long. That doesn't change the aggressive easing that is now in progress; and that will continue until sufficient signs of results become apparent. If one looks at housing starts and Housing Permits issued (the best predictor of future housing starts), one would be hard pressed to forecast any recession coming any time soon. I don't follow the auto industry, but several talking heads have stated the inventory overhang will be done this Q (2 more weeks) with a sharp pickup during the next Q. I don't like to accept unverified info from talking heads even though I've heard the same story from what seems to be at least 3 distinct sources. So give that one a probability somewhat less than 1. And the Fed Funds rate has come from 6.5% to 5% in less than 3 months. If anyone had seriously suggested this rate of easing by the Greenspan Fed last December, they probably would have been committed. And the rate of inflation for January was 3.7% (I suspect this was an aberration due to energy prices; and will trend down closer to 2.5%) Thus today's funds rate is 5%-3.7% or a Real Interest rate of 1.3% about 1/2 of the historic average. This is a rather easy policy not an abnormally tight policy. And if one compares that with the beginning of this year (6.5%-3.7% = a real rate of 2.8%), that wasn't far off the average - a little toward the easing side. And this is the difficult part for the tech investors. If one looks at most economic measures, the economy is going through a speed bump rather than a major event. For the tech side, the story couldn't be more different. FWIW, Ian.

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