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Strategies & Market Trends : The Art of Investing

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Nov 28 4:00 PM EST

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To: Sun Tzu who wrote (753)	7/23/1999 12:57:00 AM
From: Frank Sheridan	Read Replies (1) of 10653

Hi Sun - here's the deal about the market drop, according to one market Cassandra. The short version of this guys lengthy dissertation is that Greenspan and the Fed have decided that the stock market is very overvalued, and so they are going to raise interest rates until they cause a "correction" sufficient to make the old guys at the Fed feel better about the DJIA. This particular Cassandra feels that the market will fall up to %50 over the next few months. The reason that I think there is any merit at all to his viewpoint is the fact that the Fed has just raised interest rates even though there is no evidence of either rising prices or rising wages. Wasn't the Fed worried about deflation several months ago? My take on the current market? Every dip I've watched for the last three years has been followed by a rally that takes the market to new highs. I don't see this trend stopping anytime soon, and I don't see anything stopping good companies from gaining in value. However, weak and overvalued companies are going to be pounded mercilessly. Of course this begs the question of what exactly is an "overvalued" stock when the average P/E on the NASDAQ seems to be something like sixty to one. P.S. If I had listened to this Cassandra guy three years ago I would have sold all of my CSCO stock then. Good thing I didn't listen to him.

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