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

To: Haim R. Branisteanu who wrote (23935)	8/26/1999 10:15:00 PM
From: kimberley	Read Replies (1) \| Respond to of 99985

a couple of questions... <<f the inflation indexed bonds trade below par this is a sign that the reported inflation is below the actual inflation. Same with 30 year bond which trades around 2.5 to 3% above actual or anticipated inflation. The time spread is around 3 to 9 months.>> how/who determines what actual inflation is... and why is it different than reported inflation? Now with low GDP and decent spread in the bonds we have an economic slowdown but with some inflation. Therefore the negative corporate earnings growth in the GDP figures as reported to the IRS. (yeas to shareholders there are a different set of number usually misleading). I didn't realize this, but it makes sense. so collectively, corporate growth is significantly weaker this quarter, and prices the same, so inflation?? sorry if i'm being dense... this fascinates me, but i realize i'm out of my element with you guys. thanks for taking the time to teach me. best, kim

To: Haim R. Branisteanu who wrote (23935)	8/26/1999 11:10:00 PM
From: Bob Markley	Read Replies (1) \| Respond to of 99985

<< That is why an inverted yield curve indicates recession as the anticipated inflation is going down. A flat yield curve is "soft landing" or little growth.>> Haim, Confused, ... is not inverted interest rates caused by short term greater then long term, such as the spike in short term rates in '78 that caused the huge gold rally? Would this not show a state of illiquidity in the economy where short term money is dear & long term avaliable? Where the curve would "bulge" high in the short, rather then a normal pattern of LT money at higher rates then ST? Agree that a negative slope on the yield curve could show a dropping rate of preceived inflation, but then could this not just be in response to the lag of monetary policy & the influx of cash into the economy? Could not the low GDP #'s just show that the economy is not overheating and the gentle deflation that has been propelling the bull market is still intact? ie. that it could go alot higher?