First I wasn't trying to trash you and apologize if it seemed personal. I know you have posted the problems with this market along with us in the past. I do still have to disagree on a few points though.
KO, DIS and the others you implied were not bloated stocks I would disagree with strongly. They have PE ratios of 39+ and 34+ respectively as of today's close which I would have to say is FAR from realistic considering they are not new start ups. KO is in almost every market already and it is sugar water not a cure for the common cold. DIS is losing money in everything except thier theme parks and faces increasing competition from Universal studios etc. but this is not that important a point.
As far as using a baseball bat to hammer all stocks equally, this weeks declines were about 6% for the major indexes DOW, SPX etc and only 3% for the RUT and .7 on the AMEX. The small caps received only half of the punishment and though many of them are value plays, there are plenty of speculative .com companies that are over valued there also and I "assume" they were the ones that received most of the damage.
I do agree with you that the money chases the fewer stocks based on perception but I don't feel this is entirely due to the fed making the market nervous. I would contend that the majority of this was actually caused by the creation of the bubble itself. The market moved away from "value play" and "investing" long ago and became trading. I will be the first to admit that I tried buying value when I first got back in following my divorce and quickly realized it didn't work anymore. I switched to TA based semi Momentum style plays based on a trading style versus an investing style because it worked. Just like Dennis, we know this is not what the market was intended to be, but it is what makes money so we adapt. Is it right? No but it is the only way to play just as long as you don't forget, someday this will end and when it does, I won't feel sorry for anyone who fools themselves into thinking it is anyone's fault but thier own.
It is in the best interest of the market to correct to realistic values where sound companies with good leadership, money making abilities and a bright future are rewarded for success and not the companies that can best hype thier stock and get the momentum roller coaster going up to attract those of us that latch on for the ride using the greater fool theory knowing we are over paying but counting on J6Ps to buy it from us at the top.
As you said, this is a Man's game (figuratively speaking ladies) and when the house of cards tumbles, I won't blame AG, I will blame those that would not admit to themselves that this market is almost double over valued and it all had to end sometime. Those that wan't to blame others for thoer errors are the boys IMO and the men will belly up and either be out or pay the price. Unfortunately the bubble has become so large that you are right in thinking that the end could create real economic problems for the country as spending grinds to a halt starting the ball rolling the other direction. Slowed spending because J6P suddenly feels poor will mean he won't pay for a truck what he spent for a house 10 years ago. This in turn will cause massive layoffs as GM just promised 50% pay increases to thier labor force (which is not inflationary <g> ).
AG has his hands full and I would not want to be in his shoes. He needs to deflate the bubble without causing a total collapse in the economy. When he tries to be easy and not let all the air out at once, Abby and the other hypsters get on the tube and runthe market up another 30% on lower earnings.
Last year he did have to lower rates not because of LTCM but to increase spending in the US so we could absorb Asia's exports to get them out of the gutter. This was the plan and it worked to a degree. Unfortunately, much of the same easy money went to the lottery we call a stock market instead of just Asian imports. This spring he couldn't raise rates back up because we were trying to save South America the same way. Ag saved the world at the possible expense of the US. That is where we are now. AG saved the world and now he has to save us. The jury is still out. He will either go down in history as a scab or a hero.
Good Luck,
Lee |
