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Pastimes : All Clowns Must Be Destroyed
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To: fedhead who wrote (30407)5/1/2000 7:39:00 PM
From: pater tenebrarum  Read Replies (3) of 42523
 
i will ask you a trick question now: how come the NAZ needs to discount a 50 bp. rate hike, when all those sage advice dispensers on Wall Street are telling us the tech stocks are not interest rate sensitive? <g>

seriously, this reminds me a bit of '87, the last year we had inflation accelerating at a similar pace. at first, the signs were ignored, albeit not in the bond market that was still very much influenced by the late '70's inflation scare mindset and doubted the then freshly arrived Greenspan would live up to Volcker's inflation fighting credentials. generally the bond market hadn't yet realized inflation was well and truly dead.

now, things are different in some ways, but not all. for one thing the bond market now believes inflation to be dead, in spite of more and more evidence to the contrary. i believe when it finally realizes the error of its ways, it may make a violent move. unless of course the Fed turns all of a sudden vigilant. in which case the NAZ better get prepared to discount another 150 bps, not 50.

i have other criticisms regarding the bottom as well...the main one being that we never got to the sentiment extremes usually associated with true lasting bottoms. never mind that the NAZ at the recent bottom was valued at TEN times the valuation of the Dow Industrials at the PEAK in 1929...<vbg>

for another thing, the bubble in the big caps wasn't even dented. do stocks really discount both the rate increases that have already occurred and the increases that are probably ahead? not very likely...how far is the S&P off its record high? 7%?

i realize the NAZ acted ST bullish last week by rising on bad news. we'll see what happens should the news get worse. the productivity data on May 4 may well decide which way we're headed over the medium term.
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