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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 674.96

+0.9%

Nov 25 4:00 PM EST

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To: wmwmw who wrote (13420)	5/10/1999 3:06:00 PM
From: pater tenebrarum	Read Replies (3) of 99985

Wang Wei, granted that many people, including a bunch of prominent economists, seem to think that crude oil prices somehow don't count with regards to inflation prospects. i happen to think otherwise. since crude is a very large import item, it's rising price puts pressure on the trade balance, which in turn pressures the dollar, and that puts pressure on the import component of inflation. in addition to that, money supply has been growing like weeds lately and the printing of money as far as i know tends to lead to a decline in it's value, otherwise known as inflation. i believe that AG's speech has made clear that he doesn't believe that the laws of supply and demand have been suspended somehow. didn't he mention that he heard it all before, referring to 'new era' talk? the long period of disinflation naturally has conditioned everyone into believing that inflation is dead forever. that's probably a dangerous delusion; history is replete with examples of such popular misconceptions. the very moment a vast majority of 'experts' widely accepts a certain state of affairs it is usually time to look for things to change. i also take issue with your statement that we are not in the 'greater fool' stage in this market. i think that is precisely where we are. this is not to say that this blissful state of affairs may not carry on for a while yet. i just think it's useful to be aware that there's a certain reality disconnect associated with the market's valuation. to quote barton biggs: 'the fools are dancing'. regards, hb

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