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To: Mephisto who wrote (22122)	5/24/1999 11:03:00 PM
From: Mephisto	Read Replies (4) \| Respond to of 24894

Interest Rate Increase? Kenneth N. Gilpin asks Kevin Parke, chief equity officer at MFS INVESTMENT MANAGEMENT in Boston. Q. The Fed didn't actually say it was going to raise rates, and many analysts say it is unlikely to do so this year. Do you agree? A. I would be surprised if the Fed didn't eventually raise interest rates this year. As international economies recover, that puts more pressure on rates. And one of the main reasons the Fed cut rates three times last year was to help the world financial system. If they truly believe the patient is now healthy, they can turn off the I.V. machine. We are not worried about consumer inflation, because there is no indication you can pass on price increases at all. In fact, companies are still cutting prices. Just look at what Amazon.com did with best sellers last week. And the competition followed. Q. Can the hot growth stocks that have led the market thrive in this environment? A. You have to be very careful what you pay for high-quality growth stocks. This market has been helped by earnings, but it has also been helped by higher valuations for growth stocks. If interest rates are rising, I don't think these sorts of price-to-earnings multiples can be justified. Stocks are the longest-duration financial instruments we have. They are like zero-coupon bonds. When rates are stable, price-to-earnings multiples will be stable. When rates are falling, which they have been for some time, the ratio will rise. The last thing you want to pay is 40 times earnings for a company whose growth rate is slowing. Excerpts from MARKET INSIGHT by KENNETH N. GILPIN from The New York Times, Sunday, May 23, 1999, BU8.