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<P>Excerpt from Market Rap w/ Bill Fleckenstein and a report on Robert Rubin's
speech at the London School of Economics.
<P>This guy (and his senile cohort in crime, Greenspan) make me sick.
<P>---------
<P><STRONG>Rubin warns of risky business...</STRONG> What I find most
interesting about last week is that apparently the speech Bob Rubin gave to the
London School of Economics last Wednesday was not really picked up in the
popular press in this country. I guess I'm not really surprised, given what he
had to say. It sounded more like something I or other skeptics of the new era
might have said, but nevertheless it's somewhat shocking that it wasn't
splattered all over the newspapers. So I will reprise it here, quoting from
Bloomberg News:
<P>"The chairman of the executive committee of Citigroup Inc., the biggest U.S.
financial services company, said the world faces `serious and continuing' danger
of another economic crisis like Asia's in 1997 and 1998. Threats to wider world
trade, the growing gap between rich and poor nations and unwise investments
based on the idea that new technology will ensure prosperity all could set off
such a crisis, he said.
<P>"Rubin attacked the premise that the new computer technology that's boosting
U.S. productivity removes the risk of investments. `We face an era of great
economic opportunity,' Rubin said. `There are no guarantees. There are real
risks, and there is much to do in both the public and private sectors.'
<P>"He said been `struck' since returning to New York about the pervading
`assumption that all will always be well' in financial markets. Instead, he
said, investors would do well to consider increasing risks.
<P>"`Record trade deficits, tight labor markets, exceedingly low personal
savings rates and stock valuations dramatically high by any conventional
measures, are all dismissed as minor caveats to the positive outlook of the U.S.
and global economies instead of being seen as possible - not certain, but
possible - excesses and imbalances that may pose real risk to our economic
well-being,' Rubin said. `The risk is that at some point the excesses may simply
become too great, and the inevitable consequences follow.'
<P>"The idea that new technologies can erase business cycles is a myth, Rubin
said. `New technologies are of profound importance, but they are not the first
new technologies of significance,' he said. Autos, electricity, railroads and
medicine led earlier productivity booms, he said, and `none of them, separately
or together, produced one-way prosperity.'
<P>"Also, he said the ratio of real income per capita in the world's richest
nations compared to the poorest had widened to 60-to-1 this year from 10-to-1 in
1900. `When all the consequences of inequality are considered, it is in fact a
major threat to economic well-being of the global economy,' Rubin said. It
`creates understandable alienation and anger. At home, that can lead to crime,
drugs and other social ills' such as damage to the environment, illegal
immigration and disease.'"
<P>Now I suggest everyone read again what Rubin had to say. This is not me
talking. This is a man who knows better than others what kind of a house of
cards has been built. When Rubin was in Treasury, everyone gave him tremendous
kudos for all the things that were engineered just right. He had the incredibly
good sense and foresight to get out of town before all this stuff turned to big
trouble. Now he's chosen to warn folks about the risks and no one bothers to
pick it up in the press. It's just perfect, isn't it? </P></FONT></DIV>
<DIV><FONT face=Arial size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>-------------</FONT></DIV>
<DIV><FONT face=Arial size=2>Business <BR><STRONG>Even in the New Economy, the
old rules of human nature apply Unbridled optimism flies in the face of history.
Nervous optimism is more appropriate </STRONG><BR>Diane Coyle <BR>
<BR>02/08/2000 <BR>The Independent - London <BR>FOREIGN <BR>Page 18
<BR>(Copyright 2000 Newspaper Publishing PLC) <BR> </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>SCEPTICS ABOUT the benefits of new technology
pounced on a thoughtful speech by Robert Rubin , the former US Treasury
Secretary, at the London School of Economics last week. Old Economy types were
delighted that Mr Rubin gave a stern warning on the risk of economic success
leading to dangerous financial excess. It is worth quoting him. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>"Our very success seems to diminish our willingness
to exercise the discipline and take the actions necessary to prolong that
prosperity, among investors, those running businesses and the public sector. In
many ways, our greatest enemy today is the complacency of good
times."</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>New Economy enthusiasts, he went on, "fail to see
that there are no guarantees, that there are real risks, and that much depends
upon whether business and government act to realise the opportunities and deal
with the risks". The unbridled optimism flies in the face of all human history,
he concluded. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Call it the Paradox of Prosperity. Economic good
times carry the seeds of future bad times, as it is in human nature to fling
caution to the winds on the assumption that current success means that old rules
of prudence no longer apply. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Richard Jeffrey, chief economist at Charterhouse
Securities, picks up on the implications of the paradox for the UK, and
specifically this week's monetary policy decision. He argues that the MPC has
been far too lenient, and ought to be raising interest rates sharply, with
lending to households growing at a brisk 9.3 per cent a year and house price
inflation accelerating to 16 per cent a year. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>"After a period of sustained sterling strength and
intense competition among retailers, inflation should be even lower," he argues.
In effect, he believes that the inflation target is too high for these
circumstances, when technological change is bearing down so much on inflation.
</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>A research paper published by Goldman Sachs
specifically analyses potential responses to the technological boost on the part
of both businesses and households, and policymakers. The paper, "The Shocking
Economic Effect of B2B", focuses on the potential for business-to- business
e-commerce. The investment bank predicts that online transactions between
companies will grow from 0.5 per cent of the total now to 10 per cent by 2004,
taking the annual value from $39bn in 1998 to $1,500bn. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>The immediate impact, on which most analysts have
concentrated, will be huge cost reductions, passed on to some degree in lower
prices. These vary by sector, but range from 3 to 5 per cent in food to 29 to 39
per cent in electronic components, say the Goldman estimates. Ford and GM, the
car giants that have already said they will use the internet to manage their
supply chain, estimate savings of up to 20 per cent. The scale of the saving is
explained by the fact that each has around 30,000 suppliers. The estimated
impact on the average cost of a car is a reduction of $3,650. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>But this favourable impact on prices throughout the
economy, which will in itself boost demand, is not the end of the story. The
authors, Martin Brookes and Zaki Wahhaj, suggest two further channels through
which the technology boost will shape the New Economy. One is that consumers and
investors will anticipate the higher potential output of the economy, through
the mechanism of the equity market. This will boost demand automatically,
offsetting the pure downward pressure on inflation. It could even be
inflationary in the short term, forcing the monetary authorities to raise
interest rates. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Another possible channel is that central banks will
loosen monetary policy compared to what it would have been in reaction to
falling costs and prices, allowing interest rates to fall. This, too, will
generate additional demand, so there is higher growth with unchanged inflation.
</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Alongside this output-inflation configuration,
either there will be higher share prices with higher interest rates, or lower
equity market values and lower interest rates, implying that monetary policy
should be responding to the potential future demand captured by asset prices
rather than any backward-looking measures of demand. In practice, central banks
are cautious about responding to asset markets, whether housing or equity.
</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Either way, the New Economy is one in which after
10 years the potential real gross domestic product of the main industrial
countries is 5 per cent higher than it would have been without the internet
effect, an annual boost to growth of 0.25 per cent. Inflation is lower in the
long run (although higher in the short term), ending 0.9 per cent below the
baseline level after 10 years. This assumes that central banks will not have
loosened policy as much as they could if they wanted to capture all of the
technology boost as higher growth rather than lower inflation. Mr Brookes
describes it as a "moderately optimistic" conclusion, implying that there is
scope for the authorities to take modest risks with inflation for the next
decade or more. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>One way of reconciling this modest optimism with Mr
Rubin's pessimism - although he goes out of his way to describe himself as a
cautious optimist in last week's speech - is to suppose that central banks might
well make mistakes, but the economic penalties will be less severe than in the
past. The benefits of the New Economy will take a decade or two to become
apparent. Even so, the scale of the supply-side boost to the economy looks so
large that it is hard to see any prospect of an error in setting interest rates
big enough to swamp its benign results. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Still, perhaps that conclusion also falls into Mr
Rubin's trap of complacency. In the circumstances, only one kind of optimism is
appropriate: nervous optimism. </FONT></DIV>
<DIV> </DIV></BODY></HTML>
</x-html>From ???@??? Wed Feb 09 06:36:20 2000
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Status:
There is a free beta version of a program that runs Point and Figure
using a QFeed at http://www.pnfcharts.com/
I've been using it for about 2 months, it's fairly stable. This program
is free, no ad involved. Following are the instructions I received from
the author.
--PJS
From: Atin Malaviya
Wednesday, February 9,
2000 8:04 AM ET
Reply # of 3468
New version of QPnf (version 2.0.0.19) available at:
http://www.pnfcharts.com
Important:
New installation instructions:
1. Unzip the downloaded zip file into a temporary
directory.
2. There will be a Setup.exe unzipped that you must run
to install QPnf. You may choose to install over a
previous version of QPnf.
This version:
1. Fixes intermittent deadlock problem (hopefully!)
2. Adds percent change based charts -- each box is a
user specified percent higher/lower than the previous
box in a column. These seem to work best with non-tick
charts and stocks as opposed to SP0H, ES0H. I use
2.38% for daily stock charts, 0.238% for intraday
charts. If you feel like the program hung, click edit/edit
chart properties and change the percent based charts to
user defined and change the box size to one you are
used to. The charts should show up. Try again with a
different percent, I will debug this sometime soon . . .
3. Save defaults saves across runs.
4. On daily charts, adds a Bollinger band (50 period
MA, 3 std dev apart) marked with Top/Med/Bot.
Still working on saving state -- this is turning out to be a
lot harder than I expected. Also, support/resistance
lines.
-Atin
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