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Strategies & Market Trends : Asia Forum
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To: Cynic 2005 who wrote (7222)10/20/1998 12:36:00 PM
From: Robert Douglas   of 9980
 
MMV,

The article in your provided link (http://www.fame.org/fedwatch/fw-003-frame.htm) makes the contention that the Fed policy of 1992 and 93 caused the stock market bubble of the 1990s. Ridiculous! It tries to demonstrate this by showing a chart of “Real Fed Funds Rates” from 1981 to 1997. Although this may appear to be a lengthy time period, the period chosen is disingenuous. It is so because the reader is given the impression that the low real rates of 92 and 93 are highly unusual. They are not! In fact it is the very high real rates of the 81-86 period that are a historical aberration. You would have to go back to the early 1930s to find real rates this high. In fact the yearly return on T-Bills for the entire period from 1926 to 1987 was only 0.4% after inflation is subtracted. (Source: Ibbotson & Sinquefield)

-Robert
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