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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Kurthend who wrote (2716)	3/19/1998 10:08:00 PM
From: Stitch	Read Replies (4) \| Respond to of 9980

Kurt, <<The article mentions that the Asia crisis isn't the big bear that it was suppose to be.>> Oh its a bear all right. By any measure its a bear. But the article went on to say: <<Sure, Asia's crisis is hurting U.S. firms. Falling exports to the region helped boost the trade deficit to $12.04 billion in January, a level not seen since the late 1980s. But as far as domestic conditions are concerned, recent reports paint a picture of an economy just roaring ahead -- consumer spending, employment and production all are on a strong growth trend.>> I guess the article is trying to point out that, so far, the U.S. economy hasn't staggered from catching the infectious Asia econoflu that many were concerned about at the close of the year. But it is much too early to tell IMO. We still have a lot of unknowns out there, Japan, Indonesia, and the fate of China's currency are the known concerns. There may be other problems like the slowly unfolding damage in the banking sector in the region. Declining earnings among U.S. firms are another concern of mine. That the technology sector has rebounded (up 17% since January 1) in spite of earnings shortfalls suggest that there is continued support for the market from new money. I suspect this is money that is pouring into 401Ks from high employment rate in the U.S. Will it continue? I guess as long as there is healthy levels of employment it may. But, again, still a lot of unknowns. Best, Stitch

To: Kurthend who wrote (2716)	3/20/1998 9:38:00 AM
From: Mohan Marette	Respond to of 9980

On Interest rates,wage inflation etc. Kurt, Here is a different hypothesis as to why the Fed will not raise interest rates immediately on account of the tight labor market. 1.Tight labor market: Sure,unemployment rate is at an all time low,the economy is growing at a healthy clip with no sign of a slow down,'hiring' is at an all time high creating almost 300k jobs a month etc etc. Curious though it might seem, there is another phenomenon that is occuring and that is 'layoffs' by large corporations. According to one study,in the last three months alone some 300k people were laid off by multi-nationals. So while all the hiring is going, large corporations are laying off employees.The study also finds that most of the hiring is done by smaller companies with less than 5000 employees,indicating large corporations are outsourcing some of their work to smaller companies,thus eliminating higher paying jobs while creating lesser paying jobs. While large corporations are downsizing and trying to reduce cost,smaller companies are hiring to do the outsourcing work of the larger corporations with lesser paying jobs. This phenomenon could keep the wage pressure under check for some time. 2.Asian effect: We may not have seen the full impact yet, but certainly as the Trade deficit data shows,imports have risen and export have slowed down and this should keep the CPI tame for a while. 3.PPI- If the decreasing CRB index is any indication,it might be while yet before we see substantial increase in commodity prices. 4.Oil Prices: Well you know how we are doing on this front.Lower energy cost is certainly going to help inflation remain where it is or lower. Therefore it is my opinion that the Fed will not rush to increase the interest rate and certainly not in March. But who knows what will happen during the second half of the year.