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

To: pater tenebrarum who wrote (26356)	9/20/1999 12:58:00 PM
From: TimbaBear	Read Replies (1) \| Respond to of 99985

hb....when I say that the PPI/CPI formula is a constant, I don't mean that it can't be adjusted when the weighting of items indicate that it is not accurately measuring what they want to measure....but once those formula changes have been made, then the formula becomes a constant for as long as it works for them....therefore, I view it as a constant....if I remember correctly, they tried to get the formula changed for a number of years before they finally were able to get enough support, so this isn't something that can be changed at whim as some might interpret your remarks to mean. You said..."...it is worrisome to note that both private bankruptcies and junk bond defaults have been rising sharply this year..." I live in Florida which is considered to be the bankruptcy capital of North America and the storyline here this year is that bankruptcies have decreased....not by a tremendous amount....but have, nonetheless, stopped rising. I don't know about junk bond defaults but I would question whether it is the number or the percentage that you see is increasing and where I might find the numbers?....I can see the numbers increasing because there has been increasing activity and therefore more in the pool that could go into default, but I haven't seen any numbers to indicate a percentage increase. I am unclear as to which you see as the more immediate threat to the US markets and/or the US economy....inflation or deflation?

To: pater tenebrarum who wrote (26356)	9/20/1999 5:30:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 99985

re: deflation: 1. we'll only have deflation, if the U.S. government is as inept as the Japanese have been for the last decade. Look at how the fed responded in October 1998. They responded quickly and massively. All they have to do is print enough money, and rapid deflation is avoided. 2. It is rapid price changes (either up or down) that are damaging, not the direction. The U.S. has had long periods of mild deflation (most of the 1800s), and mild inflation, (1960s and 1990s), which usually correspond to good economic growth. It is only large deflation (1930s) and large inflation (late 1970s) that correlate with economic contractions. 3. The liquidity crisis you see may happen, but it will be selective. Look at it this way. In late 1998, all the large South Korean companies had large debt-to-equity ratios. When the banks stopped lending, it was across the board. Everyone ran out of cash at the same time. In the U.S., something like that can't happen. Many large companies have no debt, and are growing the business out of cash flow. Intel won't stop building chip factories even if every bank in the U.S. stops lending. It is only the most leveraged companies/industries/individuals who will be hurt. I see a short, sharp correction, similar to late 1998. The worst excesses will be corrected, the strong will get stronger, and people will get a bit more cautious for a while.