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Non-Tech : Invest / LTD
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To: Lucretius who wrote (4365)10/16/1998 7:58:00 PM
From: RGinPG  Read Replies (1) of 14427
 
I knew it was that black mystery ball! Better stick to that because your explanation of the economics is a little simplistic. Yes, Japan has been dropping interest rates to 0, but unfortunately because of their huge banking problem, they were in no position to increase money growth. During the depression we were on the gold standard and could not increase money growth effectively. The U.S. now however is in a much better position. Look at any measure of money growth (M2 is probably the best for this purpose) and it has been expanding at an increased rate for the last 2 quarters (it was expanding previously but not at the rate it is now). You are right, lowering interest rates can't do the trick alone. But fortunately we are in a climate that allows the FED to do both lower rates and increase money growth.

A bear market is usually defined as a 20% drop or more in the major indices over a 6 month period. We have definitely had that. There is an old saying: "The market has predicted 6 of the last 4 recessions". This past bear market would have been extremely difficult if not impossible to predict based on economics alone. So it had to be your mystery ball. The most likely cause was fear from unsettling world market events.

The market valuations are cheap if you take into account interest rates, inflation (or lack thereof), earnings, and growth rates.

But there's no sense really in arguing. Soon we shall see which one of us is right. So far it's LT 1 .... RGinPG 0.
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