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To: Teddy who wrote (293)	5/16/1998 10:56:00 AM
From: Lucretius	Respond to of 14427

U.S. inflation higher in median CPI--Cleveland Fed By Isabelle Clary NEW YORK, May 13 (Reuters) - The underlying U.S. inflation trend may be less friendly than popular price statistics such as the Consumer Price Index (CPI) indicate, a senior economist at the Federal Reserve Bank of Cleveland said on Wednesday. ''It is not uncommon for transitory phenomena to cause the CPI to swing up and down for periods of time. But these things don't last and should not be counted on to continue,'' Michael Bryan, an assistant vice president at the Cleveland Fed, told Reuters. Bryan developed with economist Stephen Cecchetti, now the director of research at the New York Fed, the weighted median CPI, a measure of core inflation that excludes all ''high-noise'' items that clearly departs from the general price performance. The core CPI only excludes energy and food prices. The April CPI, core CPI and median CPI are set for release on Thursday. In March, the CPI was unchanged and the core CPI up 0.1 percent, resulting in year-over-year increases of 1.4 percent and 2.1 percent respectively. Meanwhile, the median CPI jumped 0.3 percent and was up 2.8 percent year-over-year. The CPI data give a very friendly reading of the U.S. inflation performance that Bryan said was partly due to special and transitory factors. Bryan cited as examples a decline in used car prices as low financing lures buyers to new models, a sharper drop in computer prices as the high-tech war for market share intensifies and cheaper infant clothes. Often made in Asia, children apparel benefits from the stronger dollar. ''In the past, whenever the CPI drifted away from the median, it tended to return toward the median CPI rather than the median toward the CPI,'' Bryan pointed out. ''The median CPI is saying most prices are rising at a rate much larger than shown by the CPI, which is influenced by very unusual and not very characteristic price declines,'' added Bryan who noted sharp energy price drops did not signal ''a more broad-based drop in the rate of inflation.'' The Cleveland Fed economist said the higher median CPI indicates progress has been made against inflation ''but just that the evidence on that score is not overwhelming.'' ''The median CPI has come down by about 0.25 percentage point in the past year, but nowhere near the drop in inflation suggested by the overall CPI,'' Bryan also said. Bryan declined to comment on the monetary policy implications of the median CPI, with the Federal Open Market Committee (FOMC) meeting just six days ahead. ''If I'm thinking about inflation, something that the Fed is trying to commandeer, I'm thinking about something very broad based. A large part of the dramatic drop in the CPI is not broad based but centered on some numbers,'' Bryan said. ''The question is how the difference between the two measures of inflation gets resolved. Eventually one of these two numbers is going to change and meet the other,'' said Bryan who noted the CPI usually tends to fall back in line with the median CPI. ''We'll see whether the items that showed sharp drops are leading indicators of a broader trend or if they are something temporary and misleading about the overall trend,'' concluded Bryan who is an adviser on inflation to Cleveland Fed president Jerry Jordan. Cecchetti is a key policy adviser to New York Fed president William McDonough. Both Fed presidents are FOMC voters.

To: Teddy who wrote (293)	5/16/1998 10:57:00 AM
From: Lucretius	Respond to of 14427

100 Reasons to Buy Gold and Gold Equities Morgan Stanley, U.S. and the Americas Investment Research - April 6 Reason #39. In the long term, the Asian crisis will re-establish gold's role as an unrivaled store of value; gold held its value over the past year while currencies plunged 70% or more. 44. Liberalization of the gold markets in India and China continues to increase, providing increased access to populaces with a high gold affinity. 48. Production from the largest gold-producing country, South Africa, is mired at a four decade low; average cash costs of $300/oz are the world's highest. 49. Environmental and permitting restrictions are becoming increasingly burdensome in North America and Australia; lower supply in the future. 50. Up to 70% of the world's gold production is uneconomic on a total cost basis at $300/oz gold; lower supply in the future. 51. Worldwide exploration activity is down significantly; lower supply in the future. 52. Mine closures/reductions increasing (e.g., Mount Todd, Lupin, Homestake, McCoy Cove, Paddington, Colomec, Hope Brook, Freegold). 53. Mid-1997 labor accord in South Africa has cleared the way for labor reductions and shaft closures. 54. Mine supply was artificially high in 1997 due to high-grading - the high grading was done at the expense of mine lives and is largely unsustainable. 55. There have been few major technological breakthroughs in gold mining since heap leaching in the 1980s; none appear to be on the horizon. 83. Possibility that a Buffet-like figure could go long gold and trigger a rally as Buffet did for silver. 87. Comex short interest is 10-15% off its 1997 highs, but . . . 88. . . . funds are still solidly short; they'll rush to cover when the tide really turns.