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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: marc ultra who wrote (12684)3/23/2000 6:42:00 AM
From: Justa Werkenstiff  Read Replies (1) of 15132
 
Marc: Re: "OK guys, what's the deal? Is the S&P using a few dying gasps to put in a marginal new high before collapsing or are we about to see a new leg of a bull market brought on by evidence that the economy will slow later on so a couple of additional rate hikes and we'll have a successful soft landing?"

I think the market is premature in expecting this hostile interest rate environment to end and I would rather be short (DOW and S & P) than long although I am neither having sold my tech. trades yesterday. I like my "short lite" positions in the form of bonds which is doing well YTD.

I do not expect a "collapse" exogenous events aside but this particular market is hard to call because it is like trying to figure out what the patients will do in the asylum next.
I expect we will retest the lower end of the trading range soon enough. The risk is squarely to the downside now. The BKX (Bank Index) is the index to watch. If it starts to head back to the crapper, the broader market rally will fail.

The market is trying to price in perfection in an imperfect environment. It is quite funny to watch. I love the analysts that come on and give price targets on the S & P 500 for 2000 giving a 20% return. The media does not call them to the carpet. How can you expect 20% when the Greenman has said 6.5%? I guess they are expecting multiple expansion too to even higher levels. Obviously, they must think he is a joke and the Greenman has done nothing to help his image in this regard.

I expect the "old" economy stocks to show some holes this quarter due to rising commodity prices. I expect to see some banks miss their numbers. I expect oil prices to remain at least in the mid twenties. I think the fat cats and the market will migrate toward tech. again and abandon their momentary fasicnation with the "old" economy. The "old" economy will have to pay the heavy price for the excesses in the overall economy and stock market.

I think there is a risk that Greenspan will do an inter-meeting 25 basis point hike next month if the market rages upward and inflationary pressures continue to climb. The 25 basis point move would be consistent with his gradualist policy. The timing would be the surprise. And there is precedent for this move. In March of 1994 -- right in the middle of two meetings -- Greenspan hiked rates 25 basis points inter-meeting and sent the S & P 500 into an immediate correction.

I read a 1994 FRB conference call transcript transcript last night and noted that Greenspan wanted to surprise the markets in late 1994 when the "credibilty" of the FRB was call into question in his mind. I think he is developing a credibility problem. The market does not fear him or is convinced the soft landing will occur as is reflected by the sentiment gauges.

I would also remind folks that Greenspan did raise rates in an election year (August 1988) when he hiked them 50 basis points.
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