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Politics : Formerly About Applied Materials
AMAT 259.21-4.0%Dec 12 9:30 AM EST
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To: Jerome who wrote (18962)4/23/1998 2:31:00 PM
From: Adam Nash  Read Replies (2) of 70976
 
* OFF SUbject *

I hate off-board subject posts, but I have to add about the Fed and the market:

The Fed made a huge breakthrough in the 80s realizing that M2 and traditional measures of the money supply were starting to lose correlation with the actual money supply. Right now the Fed does tremendous to work to get the whole picture, because of the new ways assets are flowing around.

The ballooning use of consumer credit, increased use of money market funds and even stock funds as cash repositories for individuals makes it very hard to say that the stock market valuation has nothing to do with inflation, etc.

The real issue is: is the stock market high a market-driven offset to international deflationary pressures? Or a symbol that ignoring the huge move of the money supply to equities has left a gaping hole in our monetary management?

Time will tell. Some would argue that the Fed should just leave rates alone, concern itself purely with the money supply. But that assumes that the money supply is still under control of the banking system, which is no longer obviously true.

There. Back to AMAT! I want to buy this stock, but I am not comfortable with current projections for 1999. They seem high, given the current market...
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