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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: Zeev Hed who wrote (4303)11/8/2001 9:44:38 PM
From: s berg  Read Replies (3) of 99280
 
Zeev said,
The answer is quite simple, their alternative is money market at 2%. Any company that shows an internal rate of return in excess of 2% is "equivalent" return...But I am also on record that the lows we have set in late September are "it" for this cycle.

Low MM returns (the institutional / CNBC mantra of the current rally) make the turnips appealing but don't make me want to return to LTBH investing yet. I do not agree with you about the lows being in. Typically the lows of bear markets come 4-6 months before the end of accompanying recessions. It would seem unlikely that this will be a short 90-91 style recession since
1. it is worldwide (the supertanker analogy cuts both ways),
2. it is related to a cap-ex bubble and an accompanying stock market bubble. Typically bubbles are ended by recessions of average or greater than average length
3. A more subtle point someone posted here months ago is that the net effect of the fed stimulating before / early in the recession is to delay bubble collapse, the exact opposite of what works once you have a bubble (i.e. manage a quick collapse as in the banking crisis years ago). By injecting liquidity to reinflate the stock market bubble and further inflate the consumer bubble, the fed will probably exacerbate the recession similar to the Japanese propping up their banks. Despite the aura of fed invincibility it is possible we are witnessing historical blunders in the making. I miss Rubin.
4. Sharp rallies do not end bear markets they are signature characteristics of bear markets. Upward volatility assures downward volatility.
5. As far as I can tell most stock market bubbles, Japan, emerging market, end of our previous secular bull (early 70s) involve a 50% decline in broad market. We are a long way from Dow 6000.

I know you have this interesting idea about a double dip recession but consumer confidence is already tanking. In the deflationary environment of an average cap-ex recession 2% MM looks good and turnip investing better. Unless you have some argument for a short recession it is hard to see why the bottom would be in yet.
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