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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (6908)	1/22/2003 2:34:59 AM
From: macavity	Read Replies (2) \| Respond to of 33421

It's new, it's improved, its X-flation! Poor USA Plc. I see Sir G's reflation program as suffering from the path of unintended consequences. As the $CRB has broken out in Dollars, (it is actually retreating in Euros) then input prices to American-based manufacturing entities is going to go up. Tax tariffs (c.f. steel) do just the same thing - stuff the manufacturer. Raw materials are going up in $USD either through market forces or tariffs. If layoffs continue then end-demand is not going to be there, offering 0% financing, 0% deposit, and 0% for 3 years does nothing but bring forward future consumption in lieu of savings. Sir G is being painted into a corner slowly but surely. Yes, he will have his inflation (increase in the supply of money) - but this will not translate into higher demand or prices, not while capacity utilisation is so low. There is inflation in services - insurance, medical costs, education etc., but not in goods. 2003 looks like being the year that The Consumer died! As I have always maintained, The US and The World can take the post-bubble medicine slow or fast. Politics dictates taking slow as you have to make the next 4yrs look as good as possible, so you and your cronies can get the cream. I now use the word X-flation. I picked it up from somewhere else. This is because it neither signifies inflation nor deflation. Yes $USD money supply will increase (the definition of inflation) but unit end prices will decrease (the perception of deflation) due to excess capacity, under-utilisation and the presence of zombie companies - WCOM, NT, LU, GTW to name a few - who are allowed access to funds (so that banks/bond holders do not take a hit)depressing corporate side pricing power. Japan has been through this before - plus ca change! An inflationary depression - who would have guessed? Maybe Her Majesty's Knight of The Realm - Sir Alan Printalot! Before I get flamed, yes as always I am talking my position. Long DROOY, PAAS, SSRI, $OEX JUN400Puts Short EXPE -macavity