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

To: Goldbug Guru who wrote (5089)	7/8/1998 11:46:00 AM
From: Robert Douglas	Read Replies (2) \| Respond to of 9980

It's possible that the dow can drift to 6000 points. I agree with your prognostication but for completely different reasons. My feeling (fear) is that Asia will recover much sooner than most are expecting and once the Asian "damper" is removed from the US economy it will accelerate into the danger zone causing the Federal Reserve to tighten. The US has been extremely fortunate during this growth period with the strong dollar, the drop in the price of oil, the Asian crisis and the slow growth of employer benefits taking inflationary pressures off. In case you haven't noticed wages and salaries are growing at the same rate they were back in the 89-90 period. It was during this period that the fed funds rate was over 9%. The problem is that oil can't go much lower and may even rise, benefits are starting to move up and the dollar may have reached a speculative peak. Wage and price spirals are horribly difficult to stop once they begin and I am afraid that our grace period is about to end. If you don't think the Fed is nervous and itchy to raise rates, you should read the minutes of the recent Fed meetings. Here's one last point to ponder. There are a number of economists out there that think the rise in the stock market is responsible for the rise in consumer spending. If this is so and the Fed has to cool the economy, doesn't if follow that the Fed will raise rates until they hit the level that will cause a bear market? Don't forget Mr. Greenspan's warning about irrational exuberance. Robert