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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (3995)	12/19/1997 11:33:00 AM
From: HB	Read Replies (1) \| Respond to of 10921

Didn't the fed just announce a $26 billion sale of securities on the open market? Interested in hearing from someone who knows what that was about... Howard

To: Ian@SI who wrote (3995)	12/20/1997 10:57:00 PM
From: Jay M. Harris	Respond to of 10921

Ian, The relationship of money supply growth to GDP growth is important. However, in my personal experience in this bull market (1987 -1997) I have not seen a good predictive inflation model of statistical significance pegging the M's. I think M2 &M3 are getting distorted by global trade flows associated with foreign exchange in the short term. Also, the growth of money market and bond mutual funds is further skewing the data. Finally, better fiscal management in federal Gov outlays (3% outlay growth) is channeling more money to private sector allocation which is more productive, further increasing productivity. Frankly, I don't think the government has a good contemporary productivity measure. I look at sales per employee of the S&P 500 firms. This is growing nicely. I like to look at growth in unit labor costs or, YOY growth in wages, saleries, benifits relative to the YOY growth in productivity. This leads the CPI by 6 months with an 82% R squared. This kept me bullish in 1994 when the fed tightened a bunch of times. I stayed long bonds and looked real bad for 12 months, but was subsequently vindicated by my unit labor cost model. I currently expect a 5% long bond 12 months out based on extremely low YOY growth in unit labor costs. Jay