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Strategies & Market Trends : Waiting for the big Kahuna
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To: bearshark who wrote (10160)11/22/1997 9:46:00 AM
From: Tommaso  Read Replies (1) of 94695
 
Thanks for putting that schedule of interest-rate hikes and cuts together! It certainly shows what was holding the stock market back in 1980-81, as well as Volcker's determination to stop inflation. I guess those rates are what keeps everyone so scared of what the Fed might do again if inflation started up. A person who is 40 years old would have been 23 then and found money very expensive to borrow; invrestors in their 40s are leery of that happening again. I remember paying 21 percent and more margin interest, with somewhat the same mixture of terror and hope that I now feel in committing so much money to the Prudent Bear Fund. I have never been on the short side of the market before, in 28 years of investing. Out--yes, but not short.

I was just flamed, or rather, slightly singed, by a 33-year-old investor who would have been 18 years old when the bull market took off in 1982. I think that this is probably about the median age of our enthusiastic tech-stock investors. It just does not sit well with them to suggest that maybe not everyone will get to be a multimillionaire that way.

Another thing that no one seems to mention is what a difference it made when many kinds of interest could no longer be deducted from income tax. Way on into the 1980s you could still take all your credit card interest off--everything. it helped a lot to stop inflation when the reward for borrowing got less.

To judge from the recent expansion of the US money supply, the Fed may still be talking anti-inflation but in fact trying to prevent a Japan-style stagnation.

Just various thoughts. Thanks again for taking the trouble to put that table together.
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