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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (696)	8/18/2001 8:43:25 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Should the FOMC Cut More Sharply This Time? interactive.wsj.com By Jennifer Ablan AUGUST 20, 2001 Even so, "the financial markets, more than anything, have got to be concerning the Fed," says James Paulsen, chief investment officer of Wells Capital Management. "If the economy was about to recover in a big way, you'd see a big upward move in stock prices, a backup in bond yields, and a rally in commodities. We are seeing exactly the opposite." ............................................................................................................................... Richard Suttmeier, chief market strategist at Joseph Stevens & Co., contends, "The Fed has shown a lack of confidence, and if the Fed is not confident, how can investors be confident?" He suggests central bankers slash rates by 75 basis points and make a bold statement. "They should say that they will bring the funds rate in line with market rates and accentuate the positives … state that manufacturing is expected to pick up, that the consumer is still resilient and that second-quarter productivity rose at a 2.5% rate," he says. "They should say all these things because they are true, and end it with an exclamation point by going 75." ................................................................................................................................... Michael T. Lewis, president of Free Market Inc., adds that, "while various monetary aggregates continue to register very strong growth rates, the one exception is loan growth. Growth has gone from strong to stagnant." Altogether, East says, "This is why the Fed needs to lean on the lever harder." ............................................................................................................................. Friedman Billings' East also points out that if history is any guide, the Fed may have a good bit of work yet to do. "How low does the fed funds rate need to go to truly stimulate the economy?" he says. Using the core personal consumption expenditures deflator -- Greenspan's preferred inflation measure -- the "real" fed funds rate is 2.60% (the 3.75% nominal fed funds rate minus 1.15% core PCE). During the recession of early 1990s, the real fed funds rate reached a low of negative 0.55% and was positive 1% or lower for roughly two years, he notes. Thus, in comparison to the real fed funds rate in the early 1990s, today's 2.60% level looks high, East adds. Assuming a core PCE price measure of 1.15%, the nominal fed funds rate would have to decline to 2.15% to produce a real fed funds rate of 1.00% and to 1.15% to produce a real funds rate of nil. East says, "If the growth rate of nominal GDP and/or inflation picks up, then the nominal fed funds rate will begin to look more stimulative. However, if inflation stays low, and we think it will, and nominal GDP growth remains relatively weak, a 3% or lower nominal fed funds rate will begin to look more and more appropriate."

To: craig crawford who wrote (696)	8/18/2001 9:20:06 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Dear Dr Greenspan, please help me understand mr chairman. you said it was the greatest economy you'd ever seen in 50 years right at the top of the broad markets in the spring of 1998. then in the summer of '99 you said something "special" had happened to the economy in recent years, due to technology, and yet only two years later we are in a technology led recession. in 1998 you said that inflation forecasts were off for several years, and "inflation has been chronically overpredicted...". you said the governors and bank presidents predicted inflation of 2.0-2.5% for 2000. yet the cpi rose 3.4% in 2000, the highest since 1991 following the gulf war. i thought you assured us inflation was overpredicted for years now? back in 1998 you said, "The potential for accelerating inflation is probably greater than the risk of protracted, excessive weakness in the economy" well now we have considerable evidence of protracted, excessive weakness in the economy, so i guess you were wrong. now of course you tell us in 2001, "As best we can judge at the moment there is very little in the way of emerging short-term inflation expectations". you've done a 180 degree turn and you suggest the greater risk is weakness in the economy rather than inflation. why should we believe you will be right this time? how do we know that you won't be proven wrong once again a couple years down the road? Yours truly, CC (concerned citizen)