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

To: Lee who wrote (5098)	7/8/1998 3:15:00 PM
From: Robert Douglas	Read Replies (1) \| Respond to of 9980

All the bears, please enlighten as to when, when will doomsday hit. I think the misconception of many people is that it will take some doomsday scenario to bring this market down. The concerns I mentioned in my previous post are actually normal, ordinary economic occurrences. Inflation typically builds under these conditions and would, in my opinion, already be upon us if it weren't for special circumstances, one of which is the recession unfolding in Asia. Could these forces be dissipated without bringing the stock market down? Of course they could, but the odds of this have decreased the last 6 months. (IMHO) Many market observers fear recession- what they should fear is the preceding inflation that results in higher interest rates which cause the recession. In my earlier post I mentioned the minutes of the Fed Open Market Committee. Here are some excerpts you might find interesting from the May 19, 1998 meeting. I suggest reading the entire minutes since every statement is always qualified. (Known as Fed-speak) I have read most of the minutes from the past 20 years and it is my impression that the members of the Committee are very concerned. bog.frb.fed.us Bolds are my emphasis. In the Committee's discussion of current and prospective economic developments, members noted the exceptional strength in domestic final demand and viewed robust further expansion in such demand as highly likely. But the members generally were concerned that inflation might begin to rise over the intermediate term, especially if labor markets tightened further. In their assessment of the factors underlying the persisting strength of aggregate final demand, members took particular note of the effect of accommodative financial conditions. The rapid growth in consumer spending was being bolstered by large gains in stock market wealth; Indeed, some members expressed concern that the widespread perceptions of reduced risk or complacency that had bolstered equity prices beyond levels that seemed justified by fundamentals were beginning to be felt in a variety of other markets as well, including commercial and residential properties, business ventures, and land. The decline in the unemployment rate to its lowest level in nearly three decades underscored anecdotal reports of further tightening in labor markets in recent months and added to concerns about the outlook for inflation. Some members emphasized that a number of developments that had held down prices, including the dollar's sizable appreciation last year, the drop in world oil prices, and the downtrend in employee benefit cost increases were unlikely to be repeated over the coming year and could even be reversed to a degree. The members recognized, however, that the longer any needed action was delayed, the more important it would be to take prompt and perhaps vigorous action once the danger of rising inflation became clearer. Several expressed concern that the persistence of quite rapid monetary growth this year was symptomatic of a monetary policy that was not positioned to restrain ebullient domestic demand sufficiently, even if short-term real interest rates were quite high. They believed that current policy was accommodating excessive strength in aggregate demand that very likely would be felt in higher inflation before long. If you have ever experienced "prompt and vigorous" Fed action, you know what it can do to the stock

To: Lee who wrote (5098)	7/8/1998 7:59:00 PM
From: Stitch	Read Replies (3) \| Respond to of 9980

Lee,Thread It may be my imagination but there seems to be a movement here in Asia to climb out of the denial stage. In today's WSJ there are two stories. One is a story quoting Anwar here in Malaysia admitting that the GDP estimates will have to revised again and the other is a story quoting PM Goh of Singapore saying that Singapore would likely experience a mild recession next year. The news in Asia continues to be bad. All eyes remain on Japan, where, for more then a week, they have tossed around the term "permanent" in vague, none illucidating ways. Japan is not changing much. There are so many internecine forces at work there that I think they are still bogged down in a standstill, "frozen in the headlights" mode. There are no heroes in Japan. Only apparatchiks. I don't expect elections there to result in any new enlightened leadership. By the way...just as an aside. Fairy tale metaphors are fine. But I believe it was Rapunzel that "let down her hair" rather then Goldilocks. Unless Goldilocks has grown up a bit since I was a kid. <G> best, Stitch