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To: Joan Osland Graffius who wrote (166548)	5/17/2002 5:36:45 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 436258

<<If gold is a proxy for inflation then the equity market should be retreating like heck. Or is gold being used as a vehicle by investors to protect purchasing power because of falling currencies or in the case of Japan protection of their cash assets. If this is the case then money should be coming out of someplace to support this price in gold? Maybe US treasuries????>> That's my working thesis (but I reserve the right to change my mind at any time and whenever I want!<GGG>)

To: Joan Osland Graffius who wrote (166548)	5/17/2002 5:52:14 PM
From: David Zgodzinski	Read Replies (4) \| Respond to of 436258

Joan the bullish case for equitiies would be that they are a nicer inflation hedge than gold. US companies will do better if dollar falls - well manufacturers should do better. Not retailers, because import prices might go up...not banks and home builders because interest rates might go up to defend the dollar...ok so there's a few exceptions... But in general the bulls probably like the idea of a weaker dollar, so it wouldn't be all that strange to have stocks and gold as fellow travellers for awhile.

To: Joan Osland Graffius who wrote (166548)	5/17/2002 6:56:19 PM
From: NOW	Read Replies (2) \| Respond to of 436258

gold is telling us something: what exactly no one here knows. but IMO, it is telling us that AG aint about to lighten up on the printing presses, and that the worlds reserve currency is rapidly losing its tarnish as a result. one more good shake out should come to take out everyone but the most hard core, and the really smart money.

To: Joan Osland Graffius who wrote (166548)	5/20/2002 9:18:20 AM
From: reaper	Respond to of 436258

<<If gold is a proxy for inflation then the equity market should be retreating like heck.>> The equity market is retreating like heck, last I looked. There are some companies that are actually HELPED by a little (or even a lot of) inflation, and of course there are those that are hurt. Media, for example, with its very high debt loads and low unit growth dynamics, is HELPED by inflation -- their debt is less of a burden and they can raise prices. And media stocks (especially radio) are doing great (despite my short positions <ng>). A lot of boring business services companies, from Paychex (payroll) to Cintas (uniform rental) to ABM Industries (janitorial services) are helped by inflation. Restaurants I think in general are helped by inflation. Consumer packaged goods companies are helped by inflation. Healthcare services companies (like hospitals or HMOs) are helped by inflation. Frankly, MOST of the stocks that are going UP look like inflation proxies to me. GROWTH stocks, especially TECH and DRUGS, are DIS-INFlATION/DEFLATION proxies and they are doing poorly on the whole. Also note that historically small-cap stocks have been better inflation proxies. Now frankly my personal belief is that Al's attempt to "re-flate" us out of this mess is going to fail, and by the time we get to this time next year we'll all be talking about "deflation" again and the ten-year will have a 3-handle. But right now I see the action of gold, the bond markets, the stock market, and the dollar as perfectly internally consistent (at least on a relative basis; maybe not absolute (i.e. P/Es are probably too high)), and the message is that the market sees much higher than expected NOMINAL GDP growth ahead and higher-than-recent-experience inflation. Cheers