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To: Michael Kucera who wrote (18004)	5/10/2000 6:51:00 PM
From: Archie Meeties	Read Replies (4) \| Respond to of 35685

Where is the inflation? (besides real estate...)? Employment Cost Index - the price of labor - rose 1.4 percent in the first quarter, compared with just a 1 percent rise in the last three months of 1999. Wall Street had been expecting a rise of just 0.9 percent. Biggest annualized jump in labor costs in the past 10 years. Washington also announced that inflation from the Personal Consumption Expenditures - or the PCE - rose at a 3.2 percent annual rate in the first three months of 2000. The rise was 2.5 percent in last year's final quarter. Personal consumption is now growing at the fastest rate since 1994. Price deflation attached to the first quarter Gross Domestic Product jumped 2.7 percent compared with 1.9 percent late last year. Expectations - a 2.2 percent increase. Looked at the CRB lately? I urge you to take a look. AG is much more than 50bp behind inflation, and he knows it. The only hope you have in seeing only a 50bp hike is a collapsing equity market and subsequent global deflation. I urge you to turn off the televesion and look into this matter on your own. Inflation is present, and rising for reasons beyond asset inflation. It is rising because of the pull of demand and the finitude of certain commodities as well as a recent deluge of expensive dollars. All this points to tightening monetary policy, a slowing economy, and larger doses of tough love. But don't be surprised to hear that this next correction down is actually good for the market and good for the economy. Voltaire, as for this argument about the houses not trashing their inventory... Here's how it's done. First, massive amounts of some stock (pick anything, CSCO, QCOM, DELL, etc) is shorted, and then word gets out that so and so is bearish about this company. Then they begin selling their inventory, even at a loss. The inventory is gone, the selling persists, and so and so is free to cover when some fair or undervalutaion is reached. This is usually accompanied by the issuance of a "Sell" rating.

To: Michael Kucera who wrote (18004)	5/10/2000 11:07:00 PM
From: Dr. David Gleitman	Respond to of 35685

Hi Michael: I too am wondering where the inflation is. It is said that the spectre (good word David) lies with payroll combined with low unemployment. My question is that the tight job market may be due in part to a failure of our education system where we cannot produce enough qualified people to fill these positions. There are many out there that have been pushed through the educational system ad nauseum, yet remain unqualified for these types of positions. I question the logic of raising interest rates because this will not address the issue of generating enough qualified people to fill these positions (therby shifting the balance and increasing competition). Has anyone ever considered that we may be witnessing the creation of a new paradigm,)where unemployment below 4% may still be considered noninflationary. Now I am not an economist (but I play one on TV), but it has been said that raising rates will boost the dollar which would make our exports more expensive, perhaps to the point of pricing our exports above the competition, thereby weakening our export trade, thereby slowing the economy. So now we have to punish those (industry and individuals) who have done well by raising rates so that they can no longer buy a home, or build up their industrial base. Hail mediocrity. David