The Justa & Lars Honors Bob Brinker Investment Club Message Board

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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: marc ultra who wrote (7224)	7/28/1999 1:19:00 AM
From: marc ultra	Read Replies (5) of 15132

It is important to ask that while we may be heading back to the area of the July 16th highs which Bob noted may prove to be benchmark highs, with this poor rally as outlined in my previous post what driver will there be as we return to 28x earnings with the long bond still around 6% to fuel any further upside? I have been concerned about the ECI's getting worse at some point soon as the health(health insurance)component may start rising along with rising health care inflation that may be exacerbated with current disenchantment with HMO's which in turn I believe have been raising rates to provide better service. With the incredibly tight employment situation wages are likely to rise not fall, something that has led Greenspan to speak overtly about focusing on the low unemployment rate, something he would usually want to stay silent about due to political criticism. With the rest of the world in recovery to various degrees I don't see inflation dropping significantly from here and without some major reason for a sustained significant bond rally further multiple expansion is not going to happen. Also as frequently mentioned on this thread and by Bob the CIBCR is confirming to Greenspan that the dangers of inflation are all to the upside and becoming very real down the line. Yes I know the internet may help keep inflation down but this is hard to quantify in the economy and we know sooner or later commerce sites will have to stop selling at a loss to build up a customer base and "make it up on volume". The Fed's liquidity kept us going through the problems of last year but they're clearly on the other side now. We have rising rates and relatively tight money, economic growth that is too fast particularly with the limited labor force and sentiment that while maybe not at extremes suggests complacency at these valuations. If we continue to have this technically poor rally back to the July 16th highs I would not be shocked that once the July data is in Bob's model may not be positive. I wonder what the August newsletter will bring, by the time it's written there may be the info needed to make a major market decision. Marc

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