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Gee I wonder if $2 per galllon gasoline in California is inflationary? we
are there right now. The rest of the country can't be far behind. It is
time for the gov. to drop fuel from their inflation index. Maybe a
comparison to Evian at $23 per gallon is a good comparison to show that they
are producing gas for less then you are paying for water. Ira
Earl Adamy wrote:
> I'm expecting to see an uptick in inflation in the next couple of months
> which scares heck out of the markets. High energy costs will percolate
> through the economy more rapidly than the historical norm because JIT
> and internet based distribution systems trade reduce inventories for
> increased shipping frequency. As these costs rise, demand for production
> intended to increase inventory levels will increase, placing pressure on
> delivery times, product pricing, and demand for shipping capacity (which
> is already stretched to the limit). Most of the "stuff" which has been
> falling has either stabilized or is increasing in price - consider
> commodities, housing, many service costs (especially medical), and even
> computers. Not to mention labor costs which I believe will begin showing
> acceleration as demand increases for cash compensation in the many
> sectors of the economy which are not benefiting from stock options and
> are being hit with increased benefit co-payments. Once the inflation
> genie surfaces for real, it will take a lot more than 1 or 2 rate
> increases to stamp inflation worries out of the credit markets.
>
> BTW, my upside target for oil is just north of $38. I will also note
> that it is possible for equities to rise in the face of both inflation
> and rising rates (as they did in the late 70's), although I don't think
> this will happen before a major correction occurs.
>
> Earl
>
> ----- Original Message -----
> From: "JW" <JW@xxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Wednesday, March 01, 2000 11:05 PM
> Subject: [RT] FW: OIL has almost reached our upside target of
> 32.35--35.85
>
> > FYI...
> >
> > JW
> >
> >
> > -----Original Message-----
> > From: James Smith [mailto:JSmith@xxxxxxxxxxxxxxxxx]
> > Sent: Wednesday, March 01, 2000 7:13 PM
> > Subject: OIL has almost reached our upside target of 32.35--35.85
> >
> >
> > Technicians know that ascending triangles often
> > set up nasty corrections. What I find intriguing is
> > that both Nymex Crude and the Nasdaq show this
> > formation...& both violated the upper line, which
> > often occurs just before a fall. Crude hit a High of
> > 31.77 today (Nymex March) & it may possibly test
> > 32.35 tormorrow, but it looks as though its nearly
> > ready to fall off a cliff. This makes intuitive sense
> > because even though Richardson (DOE) says he
> > would "like to maintain the SPR for a crisis situation,"
> > what could be more important to the Administration
> > than winning the election???
> >
> > The Nasdaq (mar) might possibly continue to
> > 4500 or so, but also looks as though its
> > ready to fall off a cliff. Maybe there's a connection.
> > Will a surge in oil prices cause investors to
> > worry that 50bps is coming March 21st instead
> > of 25 bps, and therefore reconsider the idea
> > of holding onto their stocks?
> >
> > At some level soon the Administration will be very
> > tempted to release the SPR and perhaps there is
> > some truth to the rumors that more oil is already on
> > the way. Again we cannot rule out a move to 35.85
> > basis Nymex March contract, but a sharp Wave II
> > correction for OIL would fit nicely with one last move
> > down for GOLD and quite possibly a FreeFall for the
> > Nasdaq.
> >
> > Where do I admit I'm wrong:
> >
> > Nasdaq (mar) breaks above 4800; DOW and S&P
> > make New Highs. This would set up a mega-blowoff high
> > into April followed by a May Crash, but a strong correction
> > in the Nasdaq in March still seems much more likely.
> >
> > Panic Cycle indicated on Nasdaq for month of March:
> >
> > The problem with Panic Cycles is that they don't
> > tell you which way the market will move. All they tell
> > you is that you are going to experience wild vol in
> > the market indicated. Still, given the overbought
> > nature of the Nasdaq, the risk is that this month's
> > Panic Cycle for the Nasdaq will turn out to be Panic
> > selling rather than panic buying. Keep an open
> > mind. Let the mkt tell you what its going to do.
> > Watch for a break below 4000 (March contract) or
> > a break above 4800 (March).
> >
> >
> > Is the Yield Curve getting ready to steepen sharply?
> >
> > The mkt is discounting 2 more rate hikes and many
> > analysts believe 3 or 4 are coming. These analysts
> > may be proven wrong if stocks sell off too sharply
> > in to short a period of time.
> >
> > Is this a setup for a "curve steepening" trade?
> > If the Nasdaq sells off sharply here in March, a rate hike on
> > March 21st of 25bps may be the last hike for a while.
> > It all depends on how precipitous the slide is for the
> > Nasdaq. Greenspan would no doubt appreciate a 20-30%
> > correction in stocks, but may grow alarmed if it goes much
> > beyond that. Arbs that have put on curve flattening trades
> > would be thrown for a loop.
> >
> > Event risk is growing.
> >
> > Arbs do not care whether the trigger is a JGB slide,
> > invasion of Taiwan, an oil spike, or just a a plain-vanilla
> > stock mkt selloff from overbought levels. What matters
> > more to arbs than the event itself, is the effect it has on
> > the yield curve.
> >
> > If Greenspan chooses NOT to raise rates or it becomes
> > apparent that he may only raise them once for 25bps
> > rather than 2 or 3 more times, it turns the world upside
> > down for Arbs. 2yrs would rally as traders take
> > back some already discounted rate hikes...and bonds
> > might sell off if traders believe this is going to be
> > a 1987 style correction--that is, one in which the stock
> > mkt tumbles but the economy plows ahead unfettered.
> > A stk mkt selloff not accompanied by a slowdown in the
> > economy would make life very awkward at the FED.
> >
> > If the Nasdaq is off 30% or more, but the economy
> > continues to show signs of unsustainable growth,
> > what would the FED do?
> >
> > Since many people are in stocks for the longterm, they
> > may not care that their stocks have sold off. 401K
> > programs are automatic.
> >
> > The FED: "Damned if you do, damned if you don't."
> >
> > Some market commentators will no doubt worry
> > that the FED will continue to raise rates regardless
> > of severity of the selloff in stocks. This perception
> > could add to the stock mkt's decline.
> >
> > Other analysts may worry that the FED will not
> > raise rates enough (in an election year) to
> > be able to slow down the economy given the
> > amount of cash that keeps flowing into stocks
> > from 401 K programs and overseas buyers
> > (Many Europeans missed the boat and would
> > only be too eager to buy a major dip in US
> > stocks).
> >
> > The perception that the FED is incapable of
> > slowing down the economy may have
> > devastating consequences for the 30 year
> > bond.
> >
> > In this context I believe Friday's Unemployment
> > figures may actually trigger an event. If
> > unemployement comes in at less than 4%,
> > look out! A tight labor market is going to
> > be a major concern to the FED and traders
> > won't wait til March 21st to see what the
> > FED decides to do.
> >
> >
> > "Chaos and Mayhem"
> >
> > A lot of people are likely to grow very very
> > confused. When confusion reigns people
> > are more apt to buy the 2yr than the 30 yr.
> >
> > A precipitous steepening of the Yield Curve
> > is coming.
> >
> >
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