Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: jim black who wrote (3673)	5/16/2001 10:34:33 PM
From: pezz	Read Replies (3) of 74559

Jim, a coupla years ago the DOW dividend dropped below 2%. At the time history had shown us that every time this had occurred the DOW would fall considerably.........Not this time. The prevailing wisdom has been that Co's had been putting their cash to work buying back stock to give investors the benefit of long term taxation... Personally I believe that the low inflation, interest rate environment has a larger roll to play here.I also think that the coming of age of index funds and the perceived idea that stock appreciation is the way to retirement heaven means money will be flowing into the DOW and S&P without concern for dividend yield.. Look, I have never been a believer that valuations drive the market. IMO it's the availability of money and the perception of potential for future growth. Will that growth pan out?.......Well in the past it usually has under these circumstances....It would take something out of the ordinary for this not to happen. And I don't see inflation developing here. It would be unusual under current economic conditions but that could change. Those on this thread who are Bears think that they see the potential for adverse circumstances developing.....I'm not convinced..... . But of course their guess is as good as mine............and vise versa. The scenario of rising interest rates declining st mkt,capitulation then falling rates rising stk mkt has played itself out time and time again. When the FED pumps up money supply some of that finds it's way into the mkt. When CD's yield pre tax comes close to inflation some of that money flows into the mkts.I know this sounds pretty simplistic. But sometimes that's the way life is. Not to make complexity where it ain't necessary is a reasonable philosophy.

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