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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Lee who wrote (123104)	5/7/1999 12:50:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 176388

Greenspan addressed long-term worries -Atlanta Fed By Isabelle Clary Lee: Here is an interesting take on the Greenspan thing from a Fed economist. ================================= CHICAGO, May 7 (Reuters) - Fed Chairman Alan Greenspan's remarks that the tight U.S. labor market is a concern in the inflation outlook addressed long-term rather than immediate monetary policy issues, a key Fed economist said on Friday. ''Chairman Greenspan was clearly speaking on the longer-run perspective,'' Federal Reserve Bank of Atlanta Director of Research Robert Eisenbeis told Reuters in an interview at the Chicago Fed annual conference. Eisenbeis, who also is Senior Vice President at the Atlanta Fed and monetary policy adviser to Atlanta Fed President Jack Guynn, said he did not interpret Greenspan's latest remarks as directed to immediate concerns. The policy-setting Federal Open Market Committee (FOMC) meets next on May 18. ''Prudent policy suggests you would have to be forward looking,'' Eisenbeis said, referring to Greenspan's warning on Thursday before the Chicago conference that ''workers depletion constitutes a critical upside risk to the inflation outlook.'' Greenspan's remarks pressured U.S. financial markets amid sentiment this signaled heightened concern about inflation and higher U.S. interest rates down the road. But the April employment report released on Friday showed the U.S. economy continued to create payroll jobs at a healthy pace, with wages still rising at a modest 0.2-percent pace. ''This report is consistent with the recent pattern we have seen in the employment report. We still have tight labor markets,'' Eisenbeis said. ''With the mild increases on the wage side, there is no apparent sign this tightness is translating into an increase in wages.'' But the Atlanta Fed chief economist also noted the April employment report did not change the fundamental issues at stake in an economy enjoying very low unemployment. ''You cannot wait to see an outbreak of inflation (for the Fed to act) because of the lag between policy and its impact on the economy. This puts the priority on the 'crystal ball' and forecasts,'' Eisenbeis pointed out. ''When you see that persistent tightness in labor markets, you have to ask yourself whether (monetary) policy is too accommodative or not and if wages (increases) will pass on through to final demand,'' he added. Greenspan also commented on Thursday on productivity gains -- a crucial factor that allows an economy to run at a rapid pace without fueling inflation. ''Greenspan's message was that the two main sources in sustaining in economy are growth in productivty and in labor force,'' Eisenbeis said. ''We have seen for some time the substitution of capital for labor. In a benign interest rate environment, capital is really cheap compared to labor.'' Eisenbeis agreed permanent productivity gains are a crucial issue for the U.S. economy because they prevent inflation. But, like Greenspan, Eisenbeis said productivity alone cannot guarantee rapid growth in an economy running out of workers. ''We could have no growth for some while and still be in great shape just because the U.S. economy is in great shape. People focus on the rate of growth as opposed to the level at which the economy has been running,'' the Atlanta Fed chief economist pointed out. ''It's one thing to have little growth when everybody is employed or when you have high unemployment.'' A Chicago Fed publication recently cited a forecast for the creation of two million U.S. jobs in excess of the U.S. labor force by 2006.

To: Lee who wrote (123104)	5/7/1999 1:35:00 PM
From: JRI	Read Replies (1) \| Respond to of 176388

OT Lee- How about us batting this around for a minute? Given that there will probably be some Y2K concerns in the business community 4Q '98, not too severe, but some nonetheless....wouldn't it stand to reason that this will lead to slower business for some (many?) companies in the U.S. in 4Q '98? Less purchasing of equipment, software... This would represent a slowdown in a major sector of the economy (business purchases) no? Now, given the impending slowdown for some companies, it stands to reason that some of those stocks will not do well...or, at least, during that period, we will not see dramatic increases in equity prices (unless we see a dramatic sell-off) preceding the quarter...this is sure to affect consumer spending...the only thing that saved last Christmas was the dramatic increase in equity prices, mid-October thru Christmas... Christmas sales season....if I were to guess...I would think that consumers would be a bit more conservative than in past year...given the listed Y2K effects I mentioned...... So, if now, we are seeing a drift up in bond prices...it is logical to think that rates will continue to go higher going into next year?? (Above 6%?)...if the economy is going to slowdown (based on above...) IMO, right now, the bears can not have it both ways..If indeed they are preaching that Y2K is going to impact hardware/software/business spending going into the New Year...then that is going to have a profound effect on growth in the U.S. economy (given the significant portion of the economy technology represents)...and that is a major damper for the need for higher rates (from these levels) IMO.. Right now, the bears are getting the benefit of both assumptions (slower hardware sales AND higher rates in the future) in keeping down hardware stocks (such as Dell) My prediction: In 4Q......A slight slowdown in sales, but nothing major for hardware guys....rates range-bound 5.5...bears lamenting about the strong inflationary growth to come in 2000..continuing to spook the market up at times...continued slow world recovery....but continued rosy inflation environment... We're going slow this summer Lee....4Q GDP 6.0%, 1Q 4.5%, 2Q 3%+, 3Q 3% or maybe less...inflation flat-lining..