Ask Mohan about the Market Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Ask Mohan about the Market

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: studdog who wrote (13693)	2/1/1998 12:03:00 PM
From: edward miller	Read Replies (2) of 18056

Karl, This is exactly the argument with which I disagree. >> If interest rates rise or earnings fall then the market will fall, >> regardless if the yuppies are buying in their pension funds or not. >> Liquidity might influence day to day or week to week moves somewhat >> but over time it is earnings, the expectation of future earnings >> and the interest rate environment that dictates stock market >> valuations. What I sense over years - not day-to-day or week-to-week - is that the valuation criteria is changing. Look at it this way, when rates are rising the markets fall only slightly (consolidate) and then when rates fall the markets rally to higher highs. The important point is that these higher highs are not proportional to increased profits, but go beyond the profit increase. This is very obvious in valuations of the market indicators. We all know that market pricing swings from one extreme to another when the stock market swings from bull to full- fledged bear. What I see is a market whose valuation keeps rising with respect to the fundamentals behind it - gradually over years. I could not tell you how often I've seen historical data that shows we are at historic highs in valuations - worse than before the 1929 crash. I am not predicting a crash in this post, but I'm also not saying the opposite. As a result of not seeing any meaningful correction of valuations I realized that there was likely something driving this phenomenon. My conclusion is that the changes in the tax laws, such as creation of 401(k) and other investment options are driving money into the stock market at an unprecedented rate. With the boomers taking advantage of the tax benefits to save for retirement, this could be forming a stock market bubble far beyond anything seen before. The key word is COULD. I am not saying absolutely that this is happening. I brought this up on another thread for discussion - and it's open for discussion here if there is interest. Again, this is all JMHO. We all read the leaves differently. Ed Miller

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next