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To: UnBelievable who wrote (64107)	2/2/2001 1:19:42 AM
From: Mark Adams	Read Replies (1) \| Respond to of 436258

IP has a PE of 77? Gosh, indexing at work. I can't believe how incredibly idiotic it is that people are still pushing that indexing mantra without considering the macro impact. Non Indexed stocks are huge buys compared to these inflated favorites. <rant off> Not that I'm prepared to buy just yet. Call me a nervous nelly (apologies to MSB) How Do You See That Happening? To the extent that lending agreements are long term and call for fixed rates of interest, an inflationary money policy (where the rate of growth of the money supply is greater than the rate of growth of real goods and services) results in a transfer of real wealth from the lender to the debtor. Yes, in a simple world. Who's lending long? The money market mutual funds? Asset backed paper? Who gets hurt if money looses value? Going beyond 'the lenders', I mean. Who are the real lenders? Can you follow the money? This fact makes lenders more reluctant to lend on anything but a short term or variable rate basis. Such uncertainty with regard to the cost of capital is a major disincentive and impediment to long term real capital formation which is required to produce real stuff for real people. This sounds intelligent. But... Most traditional lenders don't hold the paper anymore. They broker it off, so that they can make new loans. This is what I mean by the old rules and indicators don't account for the financial engineering that has taken place this past decade or two. They don't care long, short, adjustable or fixed. As long as the loan fits the profile, can be packaged, insured and sold. More money may mean increased stock prices. But no one is really interested in increased stock prices, they are interested in the real wealth that they believe the value of the stocks will enable them to enjoy. Agreed. And I felt, at least two years ago, that inflation was showing up in asset prices rather than real goods, partly due to the savings taking place by the boomers. Increasing paper money can increase paper wealth. It is not particularly useful for creating real wealth. Agreed. Which means it's quite possible that the hit hits the fan when everyone holding paper trys to claim real wealth at once. Ideally, this won't happen- but it's most likely to be an issue 2010-2013 when the boomers start drawing on their savings, barring real bad things happening between now and then. (Unless you are this weeks Pig of The Dow, IP, and have a PE of 77. <gg>)* All I was saying was that inflating the money supply might not have the same effect today as two years ago. That there might be another money sink for that extra paper.