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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: puborectalis who wrote (38608)	5/6/1999 10:57:00 PM
From: kendall harmon	Respond to of 120523

GREENSPAN's speech deserves careful study and restudy. Here is the central section in my view. I take it as a move toward bias to tightening, and we need therefore to keep in mind that the macroeconomic picture in the short term MAY not be as favorable to stocks. I do not say we are in a New Era, because I have experienced too many alleged New Eras in my lifetime that have come and gone. We are far more likely, instead, to be experiencing a structural shift similar to those that have visited our economy from time to time in the past. These shifts can have profound effects, often overriding conventional economic patterns for a number of years, before those patterns begin to show through again over the longer term. Of most concern is how long this remarkable period of prosperity can be extended. As I have said on previous occasions, there are imbalances in our expansion that, unless redressed, will bring this long run of strong growth and low inflation to a close. Although productivity has accelerated in recent years, the impressive strength of domestic demand, in part driven by sharply rising equity prices, has meant that the substitution of capital for labor has been inadequate to prevent us from steadily depleting the pool of available workers. This worker depletion constitutes a critical upside risk to the inflation outlook because it presumably cannot continue without eventually putting increasing pressure on labor markets and on costs. Finally, while it is reasonable to conclude that some of the gains in output per hour have (productivity) been driven by fundamental forces, and are not only a cyclical phenomenon or a statistical aberration, it remains a wholly separate question of whether they can be extended. The rate of growth of productivity cannot increase indefinitely. While there appears to be considerable expectation in the business community, and possibly Wall Street, that the productivity acceleration has not yet peaked, history advises caution. ... For, if productivity growth should level out or actually falter because additional technology synergies fail to materialize, or because output per hour has been less tied to technology in the first place, inflationary pressures could re-emerge, possibly faster than some currently perceive feasible. We need to be alert to the dramatic changes that are continuously confronting us, but recognize that neither the fundamental laws of economics, nor human nature, on which they are based, has changed, or is likely to change.