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

To: Lee who wrote (5514)	8/14/1998 10:04:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 9980

Lee, Welcome back from the sea! You asked: What is now your take on inflation and the dollar over the next six months? Unfortunately my indicators are not nearly as precise as Zeev's turnips.<G> and 6 months for them is a relatively short period of time. I do believe however that most of the things my economic zucchinis are saying is that we are nearing the end of these two very long trends, referring of course to the decline in inflation and the rise in the dollar. As a matter of fact these two trends have gone hand-in-hand as US inflation has been kept in check by the strong dollar during a period of very strong growth. When and if the dollar begins to weaken, the rate of inflation will now feel this pressure on the upside. Of course for now the situation in Asia has taken center stage and how it resolves will enormously influence both the dollar and inflation. As always, when talking about inflation, I have to say that inflation will never come back like we experienced in the 70's and early 80's. Simply put the markets will never allow this. As inflation pressures build in the economy the markets, with some help from the Fed, will squash it and squash it early. The problem is that this squashing could easily squash the market along with it. Areas of inflationary concern are: 1) The rise in wages. 2) Rise in asset prices. 3) The likely return of health care cost increases. 4) Cost of housing. 5) A possible dollar decline. When will this all start to happen? Will it be in the next 6 months? Possibly, as the zucchinis are saying that the US economy will begin to accelerate again by the end of the year. -Robert