Interest rate rise will trigger market crash / correction Message Board

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Strategies & Market Trends : Interest rate rise will trigger market crash / correction

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To: Sonki who wrote (29)	4/7/1997 1:21:00 AM
From: Jason Roone Willet	of 52

To all: The Situation There's been some battering going on at Wall St. That interest rate hike took the air out of blue chips (and others). I believe the market is factoring in another increase in May. Inflation is the death knell for stocks especially large to mid caps, but I see no signs of inflation (across the board inflation) right now; do you? I've looked at commodity prices over the past several years. They have been in check around 2-3%. Prices even fell .3% this past January. But interest rates have risen before and bull markets have continued. I hope these interest rate hikes work for Greenspan so inflation stays in check. Theres several things that can start bear markets. 1. Inflation (The big one) 2. Low unemployment (more people working) 3. Rising interest rates together with inflation. 4. Falling Money supply 5. High p/e 's together with inflation. I see no inflation The money supply is rising. The one thing that is happening is that unemployment levels are at big time lows. This is why Greenspan is raising rates. However there may be something Greeny is overlooking. The fed looks at "payroll employment" to see where unemployment is going. A more accurate measure of how many people are working or not is "Initial state unemployment insurance claims". They tell how many people have filed for state unemployment insurance for the first time ever, not those who have been couch potatoes for the past four years. If the economic situation has no inflation and the stocks are just making a correction it is good news. Stocks have always followed with big rallies after they have gone down for no real economic reason. What goes down must come up! Or one of my favorite sayings "Buy when there's blood in the streets". That's why many of the technology stocks may be a good buy right now. Go to the party an hour after the last person has left and the punch bowl is empty. There was a supposed wall st. analyst on the radio today saying: "..yea, everyone is throwing in the towel, no one wants to buy stocks" When you hear things like that, wait a little while, then buy. If the economy is in fact heating up and inflation is near, the best place to be is small stocks and commodity sensitive stocks, not the big blue chips. That's why since everyone is nervous about the economy overheating, they may start buying into the smaller stocks on the Nasdaq. We will see. -- Merry Investing, J.R.W.

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