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Strategies & Market Trends : Waiting for the big Kahuna

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To: bearshark who wrote (12184)	12/23/1997 11:15:00 AM
From: Defrocked	Read Replies (1) of 94695

RE:"look towards 2002" An interesting counter-argument has been advanced by a noted international economist to justify the historically high valuations currently exhibited by the stock market as a whole. The logic is that the gradualistic monetary policy enacted under Chairman Greenspan has reduced the variance of equity discount rates since periods of major tightening or loosening will no longer occur. Thus higher P/E's are rational since the earnings stream is more predictable and business cycles are considered a phenomenon of the past or greatly discounted by market participants. My response is that business cycles have only been "repealed" to the extent that "gradualism" has been institutionalized at the Fed. Otherwise, P/E's deserve higher than normal valuations only until AG retires. Projected P/E's after the year 2000 should rediscount historical uncertainty. Dr. Greenspan may elect to retire at the end of his third four-year term as Chairman of the Board of Governors ending June 20, 2000. AG will be 74 years old then. Another reason we may have Y2K problems!<g> Happy Holidays everyone.

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