Mike, This time it is different, Fed rate cuts no longer have any effect. We are in the post-bubble world. It will be gloom and despair for decade or more, and the internet was just a fad, and we will all realize that soon.
I don't believe this point of view. It is possible certainly that the Fed rate cuts won't work this time, and it is also possible that we are going to have another great depression at this time. But what are the odds of this being true? I say pretty damn low. I recall just a couple of years ago the argument that Fed rate increases would not effect tech stocks (wrong!), now people are saying aggressive rate cutting by the Fed won't effect stocks overall.
This thing is real hard to figure out, and I remain open to all points of view, but my guess is that this market downturn does not last more than another 6 months. I am not saying the Naz goes back to 5000 within the next 2-3 years, but I think it will be above 3000 within a year. My thinking is based on a sort of weighted average of all the factors that are involved here. It seems to me there are a lot more positives than negatives. Some of these, I believe, are powerful factors that we probably don't appreciate enough at this point. One is the continued effect of the internet and technology on business world-wide, and the other is our demographic situation here in the USA. I really would like to understand the bear argument better, but from what I do understand at this point, this argument is based on a return to trough valuations for an extended period and just an overall chain-reaction type effect, a sort of self-fulfilling spiral downwards. If valuations do go significantly lower, which they could, I am guessing they will be down there short term rather than long term. It seems to me there is prosperity in the world overall, and especially here in America. Given that background, and this great information network that is still getting started (the internet), plus a few other positives, I just don't see the gloom and doom argument making sense for long. Just my two cents worth.
John |
