Herring, we have seen "valuation meltdowns" as a part of the seasonal spring cleaning. I don't think much has changed in our fundamentals, nor will much change after these equity drops. I believe we have already priced a half-point rate hike into these markets. . .and then some. And there is still no fear of inflation by the retail stock buyers, nor is there fear of higher interest rates anywhere except in the media. . .where they tell us every day that we are to fear interest rate hikes. Remember, the banks don't drive this new economy. . . STOCKS do. When Yahoo wants to buy a company, they don't go to the bank and borrow the money, they just issue stock.
Bottom line. . . we have a new economy made with new technology. . .we are seeing a new market with direct ordering, online trading and greatly increased volatility. . . investors are more tolerant to hold stocks at higher multiples than ever before. . .the Nasdaq index is quickly becoming more important than the Dow. . .EVERYTHING about these markets have changed.
So why do we insist on using old indicators? And why do analysts, pundits, economists and journalists insist on discussing this new market in old terms? The old formulas simply can no longer be applied to these new trends. And frankly, I believe we can have higher interest rates WITHOUT higher inflation. . . and that is primarily due to the dramatic increase in productivity in the U.S. and globally. A single CPI index hardly makes a case for inflation. And even if we do get some inflation, I don't see it as effecting our new economy, nor do I see it growing into the monster we saw in the 70's and 80's. . .we know more now.
So to better answer your question, I maintain that the selloff was more seasonal than fundamental. We'll all know the answer within the next 6 to 12 months.
Rande Is |
