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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (11717)	12/8/2001 6:09:21 PM
From: NOW	Respond to of 74559

good post. problem is, knowing when it will unwind. I believe things are more fragile now than most imagine and timing could be very problematic.

To: Jacob Snyder who wrote (11717)	12/8/2001 9:18:56 PM
From: Mark Adams	Read Replies (1) \| Respond to of 74559

Walk down the aisle at Walmart, remembering what prices were last year, and you conclude there is no inflation I've noticed increases- in basic things like Mayo or Butter. I think it's tied to the fact that there are some basic goods the consumer must purchase on a regular basis. These goods still have pricing power- so their prices are increased to offset higher costs to the mfg (employement, insurance, energy and so on). Sectors less fundamental to survival don't share the same level of pricing power, and probably haven't faced the full impact of the deflationary forces brewing yet.

To: Jacob Snyder who wrote (11717)	12/9/2001 3:23:10 AM
From: smolejv@gmx.net	Respond to of 74559

re defining/measuring inflation - CPI is just fine to keep the lambs from bleating. "D*n, Joanne, the cellerie is up 3.5% y-2-y"... Our horizon in any case is somewhere around the next gas station. If you look at the sinks of an average household cash flow, I guess CMPI (credit/mortgage price index) would tell much more. dj

To: Jacob Snyder who wrote (11717)	12/9/2001 5:11:22 AM
From: Maurice Winn	Read Replies (2) \| Respond to of 74559

<The liquidity gusher in Y2K brought the Nas to 5000. The current "fix" has only got us back to 2000. A "fix" is what every addict craves. We are addicted to easy money, ever-lower interest rates, ever-higher debt. Each new fix returns us to a state of Euphoria. But it doesn't last. And requires ever-higher doses for each successive fix.> Jacob, I don't buy that theory. Partly because I don't want to take on debt, even at 0% interest, but also because when I kick the tyres, I hear a rattle. Maybe a death rattle. Sure, there was a Y2K liquidity boost to avoid the 00 bug ending the world [or some tricky liquidity preparation if not an actual boost]. But the irrational exuberance leading to Nasdaq 5000 was not driven by interest rates being low or liquidity being high. The Nasdaq was bid up on the thrill of Dot.coms and the Telecosmic excitement, as I saw at Telecom99, which really did seem like a $trillion fission reaction going critical. Even computer sales were still gung ho as huge buying was done in preparation for Y2K. There was irrational exuberance, which was obvious at the time. Sure enough, the crunch came. Over the past 2 years, [almost], there has been a major sorting out of what things are actually worth. The big declines are in the market already [oddities like Enron notwithstanding]. There has not been a financial collapse in 2001 [both the V-shaped recovery and the Great Financial Collapse have been deferred until 2002 by proponents of both theories]. The Dow has bumbled along with the normal annual variation that has happened over many many decades. Same with the S&P. It's the Nasdaq which was sorted out and the margin accounts of debtors. The liquidity was incidental. I wondered, when interest rates were kept high longer than seemed to be necessary, [because the crunch had arrived with a vengeance], whether it was a strategy to ensure the crunch came during Clinton's reign to rain on his parade to help a Bush victory over Gore. I decided probably not and that Uncle Al was simply determined to reduce the pressure in the economy so it didn't blow up. The 'fix' concept is tempting, but if we look back over a century, we see that glitches aside [such as the early 1930s and the 1970s huge oil price rise], there has always been a rise in the sharemarkets. There has been ever increasing loads of $$ swooping around the world with ever-increasing demand for them from an ever-increasing mercantilist world with ever-increasing populations with ever-increasing real incomes as people leave their agricultural roots behind and head for the cities and The New Paradigm. It is hazardous to financial health to assume that others are addicted to credit and their addiction will cause a financial collapse as more and more $$ are injected. If we judge by inflation, which is the common yardstick, there seem not to be too many $$ looking for a home. I think we can expect, variations aside, to see continuing rises in the Dow, Nasdaq and S&P as world development continues what has happened for centuries now; at least until the middle of the century, which is long enough for me to worry about [stretching a point a decade or three, being on the wrong side of 50]]. The continuing injection of more 'euphoria' will keep that process going as it has gone for a century. Betting against that process by holding cash will see the cash-holder left behind as share values continue to increase relative to $. I agree that there's a risk that shares could decline relative to $, but increasing money-printing and liquidity injection is not the way that will happen. Tight money and higher interest rates would more likely see share prices drop. That's my theory anyway, on which I'm betting. I would not be surprised to see continuing strength in the US$ even as inflation increases [assuming deflation doesn't happen during the rest of the tidying up process]. The US$ is an extremely valuable business in its own right, though it's not usually recognized as such. It's the USA's biggest export [I'm taking a wild guess and maybe that's not right - hmm, perhaps the political system is the biggest export because I've bought it and so have many people I know, but that's more or less the US$ so the strength of the US$ represents the belief in the strength of the US political system]. Something like that anyway, Mqurice

To: Jacob Snyder who wrote (11717)	12/9/2001 7:34:53 AM
From: elmatador	Respond to of 74559

[Note: Money supply was barely affected by the Federal Reserve’s actions leading up to Y2K. The slight spike at year-end 1999 is almost unnoticeable. As postulated in my money supply outlook article last winter, the Fed’s creation of $70 billion to meet currency demands was unneeded. The freshly minted money stayed in the vaults and thus, it is excluded from measures of money in circulation. Nevertheless, to this day, you still hear occasional erroneous reference to the Fed “pumping up” the money supply for Y2K.]

To: Jacob Snyder who wrote (11717)	12/9/2001 10:36:11 AM
From: Sam Sara	Read Replies (1) \| Respond to of 74559

>When? Not now. Not yet. My best guess (which isn't saying much) is that the recession ends sometime next year, and unemployment peaks late next year, and the Fed is forced to start raising interest rates by end-2002 or early 2003. At that point, the economic recovery will still be very fragile, no robust recovery. And the Fed will be caught between a rock (second leg down of a W-shaped recession) and a hard place (inflation). And that's when stocks bottom, and gold (or TIPS) are the best assets to hold. Sometime in 2003. I can see why gold and TIPS would be good at that point. Stocks, though, will then be facing an environment where the fed is at the beginning of a tightening cycle. Stocks may bottom at that point, but their upside should be limited, with a (relatively) narrow trading range.