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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: MrGreenJeans who wrote (14186)6/3/2000 11:08:00 PM
From: Justa Werkenstiff  Read Replies (5) of 15132
 
MGJ: Re: "If Bob thinks the Federal Reserve may or may not raise rates in June and August, if they raise rates it may only by a 1/4 of a point, why is Bob still on the bearish side."

I think the issue would be the final impact of rate hikes should they occur. We may not know their impact until, perhaps, it is too late.

Re: "Is it because of a lack of liquidity in the market?"

Reduction of the money supply growth is an issue.

Re: "Does he think the slowdown is not for real?"

He questioned the economic numbers of Friday as part of a trend going forward given contradicting data points. Note also the muted bond market to those numbers as Brinker pointed out.

Re: "Does he think the Fed will continue to raise rates later this year?"

Who knows if the Greenman does not know? Cannot say at this point.

Re: "Is it the risk of recession later on? Is it the hit earnings may take in 2001?"

Most definitely. He has said and I agree that the market has not discounted the earnings impact of a recession or slowdown for that matter. Note that Cohen has said that technology earnings growth will slow later this year and that the 2000 earnings come 2001 will lead to tough comparisons.

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I can't speak for Bob. But I think the best way of thinking about this issue is to review the five root causes of a bear market:

(1) Reduction of the growth of the money supply;
(2) Rising short term rates;
(3) Rising inflation and inflationary expectations;
(4) Rapid Economic Growth; and
(5) Overvaluation.

At any given point in the market these days we had have all of these ingredients to one degree or another and in flux. But putting it all together, this is a lethal cocktail for the equity markets to swallow. And the only way to avoid a bear market recession in this environment is to engineer a soft landing. The Greenman could do it, but even if he did there would be plenty of opportunity IMO to make a market entry in anticipation of such a scenario. If he does not do it, you would definitely get a good entry point at a later date.
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