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To: Chuzzlewit who wrote (105982)	3/1/1999 2:57:00 PM
From: JRI	Respond to of 176387

Hi Chuzz- Looks likes the cat dun got dragged into Greg and I's running dialogue on inflation/higher bond yields...let me add a couple thoughts.. You hit (one of the) nail(s) on the head concerning the impact of Japanese repatriation, and large gvt. bond float on the bond market...In the last couple months, this has been a negative...I have heard that in 8 of the last 10 years, bonds have gone lower during this period (because of the same factors)... Good news..Well, yes..Starting in April, we should see a reverse of this flow...Japanese money should be coming back in the U.S. (March 31 end of "window dressing" for Japanese books) and the government will receive huge tax inflows in April (huge cash flow positive month)so, this should reduce supply quite significantly...so if we can just get thru the next couple weeks, we should be O.K. I anticipate the bond market will anticipate this in advance, and start to rally soon (before April 1, and, probably latest in 2/3 weeks)... I know you probably knew this, but thought I'd throw it out anyway.. Although I believed you properly identified the risks in the crude oil market, I tend to side with Greg in that there still remains a lot of capacity out there (Saudis, Venezuelans, and, over the next years, Iraquis)...and they have shown absolutely no ability to hold to any agreements in the past...in fact, I read a recent article that said the U.S. is now buying as much crude from Iraq (as some of their other traditional suppliers, S.A., and Venz.)...Even with current sanctions, even with reduced capacity of Iraq... I just don't see anyway Japanese in going to pick up (significantly) in the next 12-18 months..Europe is going into a demand decline until 2000, and it is doubtful that the U.S. will continue to grow at recent growth rates....Supposedly, oil stocks are still at an all-time high too....I feel pretty confortable that we won't see $15 a barrel anytime soon... You make such an important point...one that I think Alan Greenspan gets...but many economists don't.....we are no longer a smokestack-driven economy (with its particular growth/inflation model)..we have moved to an economy and model (technology driven) which allows for higher growth, with low inflation...In that way, we are in a new era...

To: Chuzzlewit who wrote (105982)	3/1/1999 3:08:00 PM
From: edamo	Read Replies (1) \| Respond to of 176387

chuz re: inflation.... i'll allow you to correct my numbers, but please allow me to correct your perception of oil...iraq is not a major player due to its political situation....malaysia,east malaysia,brunei, and indonesia are sitting with wellhead valves turned off....india has cut back on the ongc fields...china sea is silent...south american producers suffering....drilling activity down because no need to explore when vast reserves exist....deep well drilling in the north sea and gulf of mexico have tapped reserves over the past years that were never attainable...steam injection, etc..gives high output...the one thing that most analysts miss is the unmeasureable impact of technology on productivity...bond market is dominated by the same mentality as the equities market...too much excess in movement either way...economies can have smooth growth curves, but the perception of same by the augurs of financial future can't grasp the concept of growth without serious inflation...

To: Chuzzlewit who wrote (105982)	3/1/1999 7:59:00 PM
From: Boplicity	Read Replies (3) \| Respond to of 176387

Your right on with the first part but I have problem with ending. re:US government borrowing adds to supply and Japanese repatriation of funds decreases demand and increases supply. I believe the budget surplus, while it's folly to count on them knowing the dems., could lead to reduction of funds that need to be borrow, which in turn reduce the the supply. They are already talking about reducing the number of auctions. I feel the above will be the ultimate reducer of rates in USA, at it should be. The repatriation of Japanese funds could be temporary apparition do to the Japan's calendar year, we will need a few months to see if it is in fact a trend. As you know I have been worrying about Japan's stock market recovering, we could see finds leaving for that, not only from Japanese investors but, USA and European investors as well, only time will tell and there is a lot of money flowing around so it could all wash out in the end. Greg