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Pastimes : Ask Mohan about the Market
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To: Mike M2 who wrote (12256)12/23/1997 6:02:00 PM
From: Defrocked  Read Replies (1) of 18056
 
Excerpt from a discussion on expected EPS growth:

Bloomberg Dec.23 15:47EST <snip>
Rosanne Cahn, chief equity economist at Credit Suisse First
Boston, pointed out that from 1961 to 1966 --another period of
low unemployment and inflation -- wages rose 4 percent, prices
increased just 1.2 percent and corporate profit still surged
14 percent. "So what's the problem?" she said.
<snip>

Very poor analogy, Ms. Cahn.
From the high on Feb 11 of 93.81 to the low on Oct.7 of
73.2 the SPX lost 22.0% in 1966. Money supply growth went from
an 8% growth rate to 5% over the same period. Growth was
later stoked by the Great Society programs and guns and
butter policy of the powers that were.

The following is the problem, Ms.Cahn.
The asset devaluation that occurred, and is still ongoing,
in the Far East is similar to a severe monetary contraction of
money and credit. The resultant slowing in earnings growth
has yet to be factored fully by US equities, in particular the DJIA.

YTD(in $)
Hang Seng -24.53%
Nikkei 225 -32.11%
Singapore -34.45%
Phillipines -60.62%
Kuala Lumpur -69.65%
So.Korea -70.18%
Jakarta -72.24%
Thai -74.16%

The previous declines are from Dec.31,1996 to Dec.22,1997
and do not represent declines from this years' highs.

Ms.Cahn must belong to the "Don't frown,double down" school
of economic thought on equities. BWDIK.
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