How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 479.59

-0.3%

11:45 AM EST

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To: James F. Hopkins who wrote (43009)	4/23/2000 11:42:00 AM
From: SC	of 74651

Of course, back then we had stagflation with resultant 18% yield on government bonds. When you could get that kind of return on a bond many people wouldn't even consider investing in stocks. Gold was appreciating at a parabolic rate and hit $850 an ounce sometime in 1979 or 1980. Shortly after that, the Hunt brothers tried to corner the silver market and silver went up (forget whether it was $15 or $40 or more). Real estate was also red hot. The point is, there were other credible alternatives to the stock market in the mid-seventies to mid-eighties. This could be the case again, but I would prefer 4-6% bonds, stable gold and real-estate prices and a volatile stock market to run-away inflation and high rates of unemployment. As it turned out your bond purchases benefited from excellent timing as inflation turned lower. Had inflation continued to increase your bonds would have still been an excellent defensive play but your return would have been far lower in terms of purchasing power. If you play defense with bonds today, the risk is far higher. Yields are low and if inflation returns you would lose purchasing power and the price that you could get for your bonds would plummet. Gold is like oil in that the price often goes lower when some government decides to raise additional cash by dumping reserves onto the market, so this isn't really a safe defensive play either. That leaves real-estate. Real estate is good as long as you don't pay too much for what you get and taxes and maintainance are adequately covered by income produced (this can be a real pain in the rear). The last alternative is holding cash. If the market is truly overvalued and at the threshold of a prolonged bear phase, any of the above will be preferable to holding a balanced stock portfolio (especially stock held through mutual funds or index shares). So the real question is, as always, is this a blip on the screen or the start of a real bear market? Steve

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