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Politics : Idea Of The Day

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To: IQBAL LATIF who wrote (19105)	7/30/1998 10:13:00 AM
From: James Strauss	Read Replies (1) of 50167

IQBAL: Excellent post!!! The fact that higher costs are not being passed along to consumers because of domestic and international competitive pressures implies the need for greater productivity to maintain profit margins... The recent flood of downward earnings revisions, for whatever reason, implies that companies are reaching their limit of productivity within their current cost/pricing models... Only two things can happen in this environment: 1. Companies don't raise prices or don't raise them enough to be profitable... The result: Falling overall GDP... 2. Companies raise prices to maintain profitability... A domino effect of higher prices is created through the whole supply chain all the way to the ultimate consumer (You and I)... The result: Inflation that induces the FED to raise rates... Given the current paranoia about inflation phantoms the first scenario seems more likely... I believe that the market recognizes this... The GM strike settlement is indicative of a core U.S. industrial giant that cannot make the productivity improvements necessary to keep us out of scenario #1... Jim

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