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Gold/Mining/Energy : Newmont Mining(NEM) & Newmont Gold(NGC) -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (330)	9/2/1999 2:34:00 PM
From: ahhaha	Read Replies (4) \| Respond to of 587

Had to post this item: Thursday September 2, 2:32 am Eastern Time Friedman warns U.S. stock prices may be in bubble FRANKFURT, Sept 2 (Reuters) - Economist Milton Friedman on Thursday warned that U.S. stock prices could have created a bubble that posed a grave danger to the U.S. economy, he told the business daily Handelsblatt newspaper in an interview. ``The U.S. stock market exhibits some of the characteristics of a bubble,' the Nobel prize winner told the newspaper. "If this turns out to be true, then the United States will experience a deep collapse of the stock market. ``That would be a true danger for the continuation of the unusual economic expansion of the past nine years,' he added. Friedman said that the current U.S. stock market exhibited uncanny parallels to the U.S. market of the 1920s preceding the great crash in 1929, and to the Japanese market in the 1980s before the collapse there. Friedman, several months ago, had said that the FED was "doing a good job". Now he says the stock market could crash. I'm sure he would assert that the two statements are disjoint, but actually they are contradictory. The only way the stock market could rise to extended levels is through the permission of the central bank. Therefore, the FED hasn't done a good job. The FED is doing that same job today even though they raised the fed funds rate 1/4 point higher. Somehow they think that is going to slow something. It only slows productivity. Greenspan was talking about how WINxx was raising productivity, but that's no longer operational as evidenced by today's productivity numbers. When the FED fixes the price of money, the economy simply adjusts to the new higher cost. Business raises prices to cover the increased costs from the money cost feed through effect and from labor's growing resentment. Rising prices are tolerated by the public through the psychological effect of yesterday's wealth. People don't mind paying more. They can afford it. Demand holds, so an increased interest rate is ineffective. FED is supplying reserves at the margin to prevent fed funds from rising, so they are undermining what the 1/4 point increase was presumably intended to achieve. 5%, 5 1/4%, 5 1/2%, 6%, none of these will have any effect. This whole song and dance was the identical review that reinforced the economic upheavals of the '70s. FED has two choices: they can either stay out of the market by muzzling the FOMC, or they can raise rates in Draconian style to 8%. They will do neither. Instead, they will do a react to the past procedure. They will re-discount what they didn't know in the past. This will allow inflation to further embed which will cause even higher rate increases. If I can see it and everything has been evolving just like I have predicted over the last two years, you can be sure the stock market will eventually see it too. No kudos for me since I'm merely reminding everyone of the simple history which is denied, ignored, and avoided by everyone from Friedman and Greenspan all the way down to SI gophers. The stock market can't see this either fully, but it will sniff it out because this has significant real consequences. What is being sniffed now is a rapid deterioration of corporate earnings. You won't hear corporations admit this unless they will show a loss. Our society is notorious for denial. Friedman is unintentionally playing the part of Irving Fisher before the '29 crash, so he is fulfilling an expectation that is now rooting in market psychology: crash. Consider. Friedman and Greenspan are the premier economic voices in the world and they are fumbling like old fools. Friedman has no excuse. If he could see 20 years ago what he is saying now, he would not believe it. It is extremely important for everyone to understand what I'm trying to say here. This goes far beyond the sand box of the economic arena. Where there is knowledge, there is ignorance. There is no wisdom in age and accumulated experience turns into a mockery. Where is knowledge? Not in the world.