Hi Peter, I think you've done a great job of summarizing
current events. Thanks. Your post should be recommended
reading for anyone addicted to CNBC!
As in the past, usually when mutual funds and other
institutional investors are trying hard to increase their
cash reserves, it's been near the market bottom. At least
that's what Mr. Fosback preached in his newsletters and
in "Stock Market Logic." I guess the correlation has been
documented by others as well.
Of course, they've not necessarily peaked in their efforts
to raise cash, nor have we necessarily seen the market
bottom. From my own point of view, I've usually been cash
heavy during fat markets and lean (as I am now) on cash
near bottoms. AIM's method is very contrary to most other
investment models, however.
I'm not at all excited about entering a period similar to
the energy crunches of the past. They were terribly painful
for essentially everyone. Much of the severe inflation of
the time was difficult for people to tolerate. The '80s
high interest rates (reaction to '70s inflation) killed
capital spending across the board. If you attempted to
interest anyone in capital equipment back then, you needed
to show pay-back periods of 6 months. Not an easy task.
Still, the EMC's seem to be in an interesting position.
They assemble for all sorts of tiers of the economy, not
just capital equipment. If they are nimble they should be
able to keep profitable business flowing, even if at a
reduced rate temporarily.
It remains a very interesting time in the economy.
The markets reflect this.
Best regards, Tom |
