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Pastimes : Ask Mohan about the Market

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To: Zeev Hed who wrote (12016)	12/21/1997 10:05:00 AM
From: Tommaso	Read Replies (2) of 18056

If the Fed does start reacting (and I agree that they might) either to a decline in the US stock market or to too much strength in the dollar, or both, by lowering interest rates, they might set up a kind of oscillation that would be hard to control. Your guess seems reasonable. I don't know what will happen, but I do know that I will not be buying stocks even at a level of 750 on the S&P. I will cover shorts and sit in cash to see what happens next. If the Fed should cut interest rates enough to reignite the stock bubble I will be short again as soon as the S&P crosses back above 900. I know how far-off this prospect seems now, but my criterion for long-term investments involves yields on the order of 5% and P/Es in single digits. Such a situation has existed, at least for some stocks, three times in my lifetime so I can't help thinking it might happen again. A person who has owned Royal Dutch petroleum at a P/E of 3 has a hard time lowering standards.

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