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To: hjz who wrote (24321)	3/15/1999 10:05:00 AM
From: IQBAL LATIF	Read Replies (3) \| Respond to of 50167

2015 on NDX to be watched.. NOVL is a turn around story, the new management is doing wonders. AFCI is a good trade, short 71/2 puts and long 10 calls Sept.. aggressive trade but probably rewarding,,... 2018 on NDX place these trades on...a break of '985 will lead us lower hence a perfect sense to sell 2200 and buy SP99H 1270's for a trade..

To: hjz who wrote (24321)	3/15/1999 10:51:00 AM
From: IQBAL LATIF	Respond to of 50167

The Quantity Theory: Dead or Alive? Analysis by Kevin McIntyre Written March 12, 1999 As a result of a precipitous decrease in oil prices and generally abysmal economic conditions abroad, the United States in currently enjoying extremely low inflation. Indeed, regardless of how measured, inflation rates are currently at near postwar lows. Our rock bottom inflation rates are occurring in spite of the tightest labor markets in a generation and the oft-ignored fact that the U.S. money supply is growing very rapidly. Related Info GDP CPI Employment Personal Income Federal Reserve Indeed, growth in the M2 money aggregate is at a 10-year high. Currently at a rapid and accelerating 9%, the swift pace of money growth is prompting many economists, including some members of the Board of Governors, to express concern regarding a possible acceleration in inflation. Their worry is the latest articulation of the quantity theory of money, the famous treatise suggesting that inflation rates are directly proportional to growth in the money stock. The quantity theory follows from the fact that, by definition, nominal GDP equals the size of the money supply times its velocity (the number of times it turns over in a given time period). Under the quantity theory, two key assumptions are made: that real GDP grows at a constant rate and that the velocity of money is constant. The sanguine inflation environment is safe, however, at least for the time being. Although the quantity theory assumptions can easily be made when considering a longer time horizon, they simply do not hold in the short run. First, GDP is currently growing at a rate well above its historical average. Since rising incomes translate into a greater demand for money, all else being equal, faster output growth thus reduces the inflation rate corresponding to a given rate of money growth. Likewise, interest rates are extremely low; the cost of holding cash, measured by foregone interest, is lower. This also results in higher money demand, again lowering the inflation rate suggested by the pace of money growth. Finally, velocity is a wildcard. Given the notorious unpredictability of short-run velocity, all bets are off regarding a quantity theory relationship at shorter time horizons. Expectations are also playing a role in undermining the short-run link between money and inflation. For example, if an increase in money growth occurs during a high-inflation period or is thought to be a permanent shift towards a more inflationary policy, it would likely result in a quicker rise in inflation. Because both inflation and expectations therein are at extremely low rates and the Federal Reserve's credibility with regard to inflation is sound, it stands to reason that any pickup in inflation resulting from faster growth in the money stock will not occur for some time. Longer term, however, the quantity theory is very much alive and well (see Chart). Over a five- to ten-year time horizon, velocity is considerably more stable and real GDP growth averages near 2.5%. Accordingly, if the money stock continues to grow at such a high rate, higher rates of inflation are inevitable, given enough time. Beyond that, however, the quantity theory relationship is very loose, especially with regard to timing. As such, it is difficult to predict not only when prices will be affected by current money growth, but also how large such a change would be. dismal.com