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Pastimes : Ask Mohan about the Market
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To: TRINDY who wrote (6711)10/31/1997 12:06:00 PM
From: Mike M2  Read Replies (1) of 18056
 
Hi Robert, there are many points I would like to address in your note but I will only take on a few at this time. The fall of communism has opened new mkts for goods and services but it has also dramaticly increased the supply of labor which has a deflationary effect on wages. I suspect many of the workers will focus on basic needs such as food and clothing before they buy manufactured American exports. The point of "better than expected earnings" it is well know that companies that beat estimates are rewarded and those that don't are punished. The street and the companies have a vested interest in a continuing bull mkt, as a result, companies guide the analysts estimates downward as the Q progresses if necassary so the company can beat the lowered estimate. There are many big name companies which the analysts have lowered their numbers on last Q. On the issue of no inflation there no price inflation as indicated by the cpi&ppi,there is however, monetary inflation-M3 is up 9% the last year and running at a 12% annual rate since June. There are several reasons why this monetary inflation has not yet caused price inflation. We are importing deflation from the rest of the world. Most important is the fact that the monetary inflation is going into financial assets. For those who think this is good I must remind you that two of the biggest bubbles in the world this century occured in an economic environment of subdued price inflation. Specificly the US mkt in the 20's and the Japanese "bubble economy" of the 80's . We all know how long it took the US and the world to recover from the 20's. Japan has yet to recover and i believe their situation will deteriorate. More later Mike
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