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Pastimes : Ask Mohan about the Market

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To: studdog who wrote (8019)	11/15/1997 2:08:00 PM
From: Bonnie Bear	Read Replies (3) of 18056

Karl: Good points you bring up, I have been going through the same thought process. Greenspan knows the earnings projections are fabrications. Look at Seagate as an example of how far the public can be suckered by fabricated earnings projections. It's legal to do this, too. Maybe the financial geniuses on Wall Street will come up with enough accounting magic to justify their projections next year. But they don't have to deal with it until then. Remember that the S&P is like a mutual fund of the BEST stocks, when a company is merged or bought there's a voting machine that votes in another good company to replace the old one. (Tho they have some dogs like novell that hang around forever.) This happens also on the DOW, the stocks that make up the index are altered from time to time to improve its performance. If you look you'll see there's been a high turnover on the S&P this year. So the broader market could go down substantially and the S&P and DOW stay in a trading range for a long time. Also note that the S&P has a large number of companies whose stock valuations improve considerably because of their bond holdings, so their valuations can go up on nothing more than a drop in fed rates. Greenspan knows that most of the pension plans buy the S&P as an index, it is institutional investors who are the biggest buyers. Greenspan does not want the pension plans to go under as he desperately needs to cure what ails the Social Security system and a collapse of the S&P will be an early death to his Social Security bailout plans. So he is better served to prop up the S&P and encourage companies to increase their yield to entice the pension plans to buy an index going nowhere. SO my view is "more volatility ahead". Maybe a good view of this market is "if you have a profit today, however small, take it now". .

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