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Technology Stocks : All About Sun Microsystems
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To: Frank Ellis Morris who wrote (27988)2/18/2000 6:23:00 PM
From: Alok Sinha  Read Replies (3) of 64865
 
I couldn't disagree more with you regarding your criticism of Greenspan. Try to look beyond a one day sell off to what his achievement has been as Chairman of the Fed. The main question is should we trust valuations in the hand of short term momentum traders or rely on the judgement of somebody who has engineered the longest growth phase with negligible inflation.

Efficient markets are supposed to digest and reflect new information do not behave the way NASDAQ has been over the last 6-8 months. Investing in the market should be more than a game being played with borrowed money. I find your remarks about "melt down in confidence and taming equity participation" rather amusing. Based on the volume of trading it dosen't look like equity participation is coming down. What IMO is happening is that very few participants in the market today believe that equity gains are supported by tangible value / income. Any time there is a trigger that compounds that fear there is a collective move to exit resulting in sharp declines. The minute there is a sense that the selling pressure is easing, there is a herd type movement back into stocks so that the speculators do not miss on the next 200 point pop up in NAS. This behavior is certainly not what one can consider investing in a true sense.

You have to remember that the main function of secondary markets such as NYSE , NASDAQ etc is to provide liquidity for value/wealth being created from the real economy (industry) (and not the other way around). If the stock market could operate independent of the real economy then Greenspan couldn't care less how high the market went. In today's world with equity rices severely disconnected from any value measure historically, bursting of the bubble for an extended period of time can disrupt the real economy very quickly (Sep - Oct 1998 should not be forgotten so easily, when Greenspan and co averted a global meltdown)

The growth in the economy is being fuelled by trends (consumer spending, growing debt levels, falling domestic investment, growing trade deficits, wealth effect from rising equities) that would be considered unhealthy without any qualification. Greenspan is just trying to slow down these trends the only way he can - threaten to raise rates. NASD is up over 90% since last summer , a 15-20% orderly correction is far more palatable to me (with big exposure to tech names) than the market metdown on Fall 98 (or Oct 87).

You will probably disagree with most of my comments, but any criticism of Greenspan should be in perspective of his overall record.

Regards

Alok
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