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To: Jon Koplik who wrote (33574)	6/29/1999 1:16:00 PM
From: limtex	Read Replies (2) \| Respond to of 152472

JK - 1. There is no inflation in sight, on the horizon, over the horizon, on the next continent or anywhere serious in the economic world. 2. Some comentators, apparently hoping for a series of rate rises from the FEd, keep on refering to the 'reocevering' economies of Asia and Europe. Well I don't think the latest disastrous numbers from Japan show any sign of a recovery in fact they look awful. The next biggest economy is that of Germany which has a sky high unemployment rate and restrictive labor laws that almost guarantee the permanence of that unemployment and worse still the Germans are getting antsy again. Some of us still remember what the Germans did the last time their unemployment rate hit hit levels. The FEd ought to remember that. 3. Some comentators have been harping on about how the good old Fed in their wisdom dropped interest rates three times last fall. Yes and good job they did but the economy was doing quite well last year and the additional reductions haven't hurt. Indeed the economy this year has benefited by those interest rate drops and there is still no sign of inflation. The FEd were FORCED kicking and screaming to make those reductions and they only made them after they figured that the worlds entire financial system was on the point of total collapse. No finer proof is available to demonstrate that they are simply like the rest of us and haven't got a clue as to why or what is making this economy perform the way it is or more importantly how long it will continue. 4. The Chairman has referrred quite famously to "exhuberance' in relation to stock prices. He has also admitted that he doesn'really understand fully how the new technologies are affecting the economy's performance. He stated during his last testimony that he thought it would be illogical to assume that the "rate of growth" of increase in efficiency in the economy would continue to rise forever. All these statements and admissions seem to me also to be quite good evidence that once again the FEd doesn't really know what is going on with a major ingredient in the economy namely, technology. Here however we on SI do have a little knowledge of our own and I would be prepared to hazard the opinion that the technological benefits in the next five years will prove to be greater than in the previous twenty five years combined. I too don't know what the effect of those developments will be on the economy but my guess is that they will be massive in terms of productivity. 5. Over the last few years one gets the impression that the Fed dislikes the markets rise almost as much as it dislikes inflaiton. Each year for the past few years a totally outside source has provided a boogie man to scare the market. Last year it was Russia, the year before it was a fear of reduced corporate earnings etc etc. This year however the Fed are faced with a really difficult problem in that there is no outside boogie man to frighten the investors. For one brief moment they thought they had some great evidence of rampant inflation but it proved to be totaly illusiory. When the last CPI figure was released the Naz went up over 4% in one day. The FEd must then have been horror struck as they realized that they were about to be faced wth some of the best corporate earnings in recent years and there was nothing around to scare the living daylights out of investors. Well suddenly there is all sorts of talk about increasing interest rates. Where did all this talk emanate from? Only hours after we dispensed with the nonsense of inflation there is talk about increasing interest rates and not just one increase .....several. Well IMHO this is now the policy - whack the market. The FED just doesn't like the idea of the market. You can't like a market at one level and then say that because you think its too high you don't like it. That is what markets are all about. They don't like it and it looks uncomfortably like they want to have a series of interest rate hikes simply to scare the market and keep attention focused on the irrelevant interest rate decision every three months instead of the great corporate earnings that are about to be announced. How many members of the FOMC actually have any real feel or understanding of the kind of technologies that we discuss here on SI daily? Best regards and hope I'm wrong, L