That the bears and the bulls oft times fight or brawl is no news. The true "news" of this market has been Pigs never go to slaughter as pork prices are low and stock prices continue higher and the bears and bulls only sashay to a modern tune with first one leading and then the other. Part of what has made for this peaceful waltz has been an overall agreement between the head of the Federal Reserve and the President(via his representative R Rubin in the treasury). The reasons for this polite display are of far less interest to us than rebuff that will happen after the dance when it comes time to decide with whom to leave.
It is possible this argument may never happen, rather the whole party may well digress into a drunken "slam dance" on a tight rope. One thing is sure, the bull of this market has been allowed to run wild to long and has lost its vegetarian instinct for the carnivorous nature of his new friend the bear. I, though, am not remorseful as both the bear and the bull will soon devour the fattened pig BB-Q. The reason for this tight rope instead of the usual dance floor? The Federal Reserve can not act due to world economic problems.
The PPI has made a bounce though a carry through to the CPI is can not be extracted. Now as the prices involved in day to day living go up, will our ever gullible population still believe the new age mantra "there is no inflation"? These indicators are so worthless the head of our Federal Reserve never depends on the PPI or CPI for his sole determination of inflation or deflation. It will become clear to all the federal government and Wall Street have been lying to the public and the Federal Reserve. So one must ask "What can be believed as an indicator of inflationary pressure"? The GATA law suit(or threat there of?) will at best restore gold price so it may again be used as an indicator and at worst will make the price of silver the "inflation indicator" of choice for economists.
What will now make these disagreements ugly; will be the growing rifts between Alan Greenspan, the administration, Congress, and Wall Street. These disagreements will include: investment of Social Security monies in the stock market, increasing regulation from the federal government (EPA & OSHA today), IMF funding, Greenspan wanting the job again, the Dem./Repub. fight for Congress, impeachment backlashes, & Y2k. Be assured, all Federal Reserve bail-outs have ended. These will be interesting times - though not fun times (for some at least)!
The many attempts & failures to neatly blow away the DIJA highs with the problems in the NASDAQ are indicators for all to watch. There may be yet another "Higher high" but I'm not betting on it. Many have been convinced that day is now night; but when the light go off and darkness descends, what will happen, how many will still believe times are great and there is no inflation? Are you dancing with whom which you wish to go home? I'll bet the precious metals investors will at least be able to afford a cab ride home.
As for this theory of substitution in CPI indexing, at this rate will we just take two ASA vs a heart transplant? |
