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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (487)	5/23/2000 2:26:00 AM
From: Libbyt	Read Replies (2) \| Respond to of 57684

Greenspan....<OT> This is way off topic...but I'm interested if anyone else has seen signs of a "grass roots" effort to try and influence the FOMC that higher interest rates are not in the best interest of our economy. There have been a few messages that I've seen on other boards where investors want to start an email/letter campaign to let their feeling be known to the appropriate agency/Senator. I know that the email/letter campaign several years ago to the FCC made a difference when the telephone companies were trying to force a charge for email between states. The telephone companies wanted the email sender/receiver to pay a fee for every email sent...as if it were a phone call. There have been several articles recently criticizing the 50 bp hike...and suggesting that this hike was politically motivated. One of the strongest articles I've read was written by Lawrence Kudlow CNBC.com Chief Economist. Here is his recent article: By Lawrence Kudlow CNBC.com Chief Economist cnbc.com. If Robert Novak's syndicated column yesterday about the Fed is even partly correct -- and I believe it is -- then financial markets could be in for a bumpier near-term ride than most folks think. And certainly bumpier than our inflation-less prosperity deserves. The estimable Mr. Novak, who is surely the most influential conservative journalist around, and quite possibly the number one media commentator of his generation, believes that Alan Greenspan is being pressured by President Clinton's Fed appointees into a new tightening cycle that will be much more aggressive than the Chairman wants. Greenspan reportedly preferred only a 25-basis-point rise in the overnight federal funds rate. However, the Clintonite Gang of Three -- Laurence Meyer, Roger Ferguson and Edward Gramlich -- insisted on a 50-basis-point hike. Greenspan apparently decided to switch rather than fight. Even worse, the Fed announcement left the door open for another 50-basis-point credit tightening in June. And perhaps a third 50-basis-point move in August. In the context of a rising dollar and a falling gold price, alongside surprisingly benign April inflation reports, there can be no doubt now that Fed policy is aimed directly at curbing economic growth. Buggy whips in hand, with bugles blaring, the Fed austerity brigade is armed with an old-economy Phillips curve designed to slay non-existent inflation by depressing the new Internet economy. Ride on, fellas. Right out of a 1950s smokestack playbook. Too many people working. Too many people getting raises. Too much investment. Too much productivity. Too much -- prosperity. There were even a couple days leading up to the last Fed meeting when the stock market appeared to be recovering. Of course, the market was signaling strong approval of George Bush's private investment account reform of Social Security. Good thing the Fed stopped that before it got out of hand. Much too good an idea. Nearly 15 years ago a similar Fed story occurred, but in reverse. Shortly after President Reagan appointed commodity price watchers Manley Johnson and Wayne Angell, they banded together with earlier Reagan appointees (Preston Martin and Martha Seger) to pressure Paul Volcker into an easier money policy. Volcker nearly resigned, but then, like Greenspan, he went along. But then easier money was the correct course. Now, tightening overkill is a terrible idea. Is it possible that Mr. Greenspan is considering resignation? As a footnote to the saga, Bob Novak pointed out that the "Super-hawks" want to move the fed funds rate upward in line with the growth in nominal GDP (total spending in the economy, which grew at an 8-percent rate in Q4, and 7.5 percent over the past year). This, by the way, is a view held by a number of Reserve Bank presidents, as well as the Clintonite Board members. Consequently, Laurence Meyer & Co. may be preparing for a 7.5-percent or even 8-percent fed funds rate. So here's a warning: This harsh tightening mode is not yet discounted by financial markets. Not stocks or bonds. Both the fed funds and eurodollar futures markets are suggesting no more than 75 additional basis points of tightening, but certainly not 100 or 125 basis points. Trouble is, by the time the Fed gets to an 8-percent funds rate, money and GDP growth will already be slowing. That's why looking through the rear-view mirror is such a bad idea. Forward-looking prices, such as gold and the dollar exchange rate, are much better inflation indicators. The Meyer plan would be a very risky scheme. If this worst-case scenario comes to pass, then real economic growth in the second half of this year could drop below 3 percent. Even worse, next year's growth could hover around 1.5 percent. This is a long stone's throw from the 6-percent-plus growth of the past three quarters. And whenever we start down this slippery slope, recession can never be ruled out. Stocks won't like this one bit. Mind you, this is still not my best-guess forecast. There is no inflation, and the economy appears to be cooling but not collapsing. Therefore, it is always possible that the monetary professors will seek Higher Guidance and come to believe in the benefits of prosperity. The economic numbers in the weeks ahead will be very important. However, if the Laurence Meyer Phillips curve Gang of Three remains on a tear, then investors had better tighten their seatbelts. Cash is starting to look better and better. Of course, an optimist like myself always looks for the cute little pony among all the manure. Where's the pony? The presidential election is less than six months away. Tax cuts and two unfilled Fed Board seats will be back in play. It may well turn out that the Greenspan Fed is an equal-opportunity presidential unemployer. Bush the Elder has never stopped blaming Greenspan for his 1992 re-election defeat, though in truth Fed policy that year was much less important than his broken no-new-tax pledge. As for campaign 2000, Al Gore's "it's the prosperity, stupid" mantra may go down in flames from Fed overkill. Oh well, every bear market has a silver lining." Libbyt

To: Bill Harmond who wrote (487)	5/23/2000 2:38:00 AM
From: Jeff Leader	Respond to of 57684

It seemed a little odd that Mr. Kumar would identify a small private company as a big threat to Brocade. But I find Mr. Wu's vociferous defense of Brocade equally strange. Who knows what's really going on? Interestingly, Nishan ran a full page ad in Monday's SJ Mercury. They look like a group worth keeping an eye on.

To: Bill Harmond who wrote (487)	5/23/2000 10:38:00 AM
From: Tradegod	Read Replies (1) \| Respond to of 57684

Hi William, It's been a while since I've posted, but I've been reading the new thread with great interest. I'm amused by the bickering over some of the issues, but greatly respect your decision to start this thread and commend you for it. I've profited a great deal from some of your ideas, over the past two years. One observation I've picked up from following your posts is your tendency to be "right but early". I suffer from the same ailment. I recall your going to cash at the end of the year and even buying CSCO puts for the spring. What an incredible call, but what unfortunate timing. I completely agreed with your assessment, but the market convinced us we were wrong in the Feb/March timeframe and lured us back in. Then the big dip and we think it's time to go long. This market reminds me a little of last summer when we were trading AOL, YHOO, EBAY, AMZN DRIV and TERN after a major correction only to be continually lured in on these "momentum reversal days" (like EBAY yesterday) and to find ut the next day or two that perhaps we should have waited. I think just as the techs went so crazy to the upside in March, we need the crazy capitulation (which I don't think we've seen quite yet) to truly establish a bottom. I'm sticking for now to very short term trading for days when the "dealer's showing a six and I've got two eights". You can kinda feel when the shorts may start thinking of covering and jump on board. Otherwise, I think the market trades "choppily down" until then next Fed meeting. Or we get the "Big Kahuna" that the bears continually wait for. I'm reminded of the adage that more fortunes were lost in 1930-31 "buying the dips" than on October 29, 1929.