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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (67728)	9/15/1999 11:34:00 AM
From: bill meehan	Read Replies (4) \| Respond to of 132070

Wayne, absolutely. While I am far from being an economist (thank God), it seems clear that the government's horde of dismal scientists have "improved" the data to the point that nobody knows what it's really measuring. I am astounded that there's no dearth of "respected" economists who steadfastly maintain that there is no direct evidence of any wealth effect. Astrologists have as good a track record in predicting the future, and they're much better at understanding the past. The following was excerpted from my weekend comments to clients: How long can the tech sector carry the entire load? It already accounts for 24% of the SPX, almost 85% more than it did less than two-years ago, and the vast majority of this year's gains. Isn't everybody already overweighted tech, even many so-called value investors using new paradigm metrics? One thing we do know is that falling computer and peripheral prices have done wonders for the economic data (computer prices declined 3.2% in August according to the PPI), and Wednesday's CPI report should also benefit from the downward spiral of home computing. It'll also benefit from the bizarre way the data reflects the cost of shelter, which accounts for 39% of the core CPI. As Northern Trusts' Paul Kasriel pointed out after last month's report, it was up at an annualized rate of 1.2%, and for the first 7-months of the year it was up at an annual rate of 2.3%, 100bps lower than last year. Never mind that single family home sale prices have risen about 40% over the past 5-years. That's reality and has nothing to do with how the BLS calculates costs. Another interesting note on how the CPI is calculated are the improvements made by the concept of substitution. While I concede that if beef prices surge many folks will opt for chicken or pork, the August monthly publication from the St. Louis Fed, National Economic Trends, really opened my eyes. In addressing the concept the cover story states, “The BLS now allows for more substitution between CPI item categories. This captures the effect, for example, of gasoline prices rising more than prices for all other goods, which causes consumers to ‘substitute' by buying less gasoline and more of all other goods.” What do you do when gasoline prices rise as much as they have recently, buy more pasta and Gatorade and run to work?

To: Freedom Fighter who wrote (67728)	9/15/1999 12:01:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 132070

Wayne, it stands to reason that IF the stock market should collapse, it would have disastrous consequences for the economy due to the combination of a negative savings rate (soon to be positive again due to another round of tinkering by govt. statisticians) and mountains of household and corporate debt. surely deflationary pressures would mount in such a scenario - and the modifications to the calculation of CPI may come back to haunt the government. hb