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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (17897)	6/19/1999 1:05:00 PM
From: Jeff Jordan	Read Replies (1) \| Respond to of 99985

dismal.com

To: Haim R. Branisteanu who wrote (17897)	6/19/1999 6:43:00 PM
From: Michael Watkins	Read Replies (1) \| Respond to of 99985

Haim, I too suspect that inflation is here or coming soon and I think perhaps the bond market is giving us our biggest clues. I'm no economist but it seems to me that negative price shocks over the past two years have had a huge underlying effect on prices overall. The base reasons for the commodity declines are surely evaporating. Prices have no real option but to climb. I don't buy the "new era" types nor do I believe the internet is going to offset the removal of the price shocks. I'm no luddite - I've been on and employing the internet in my own business for almost 10 years. But in our core commodities, goods and services that most people manufacture and buy... just can't see the internet making up for what a good old fashion geographic economic collapse can do. I think Greenspan is in the enviable position of being able to put through two .25 point hikes, and I'm inclined to think that he is likely to rolled them up into one. In my simplistic thinking I believe Greenspan has a good story to tell no matter how things roll out after rate hikes. Basically I don't believe it will be harmful in the intermediate term either way. 1. If inflation numbers over the next few periods continue to look benign he will argue that the economy is healthy enough to absorb the hike. And perhaps he'll get some credit for keeping future inflation in check through a preemptive strike. The talking heads will say he just picked up the slack from previous easings when things were less certain. 2. If the recent CPI turns out not to be an accurate predictor of future numbers, he will appear clairvoyant. As a backdrop, he is fortunate to have the following conditions: - Recent strength in the market and sentiment seems to suggest that even after a knock down, investors will be back for more. A .5 point hike will not kill the market (but the general sale I'm hoping for will be assured... ;) ) And the unknown beckons: - Can anyone really predict how individuals and organizations will hold up through Y2K? Reality and perception may be very different and who knows which direction each will take. Hysteria has its own impact on people and the economy, he may need some "dry powder" of his own to deploy depending on how things turn out. - If they feel the need to act, now seems to be the time -- not 60 days or more from now. Another quarter and corporate America just might be reporting more impact. Preemptive appears to be the watchword with the Fed. Too close to the year end and it may not be possible to take up slack. Just some simplistic thoughts. (Oh yes, I'm in Canada and oddly enough what the Fed does matters more on our financial news than our own central bank. We've also seen a return of local gas prices to their highest levels in two years. Not that a spot event like this is meaningful, but I find it interesting and a bit disappointing when I fill up the wagon!) PS: I thought he was a smily ol' guy in his testimony on Thursday. He looked for all the world like he was happy with a little secret. Just my opinion and I can't chart it or apply linear regression to a feeling either. damn!