The Justa & Lars Honors Bob Brinker Investment Club Message Board

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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: marc ultra who wrote (5163)	5/18/1999 11:49:00 PM
From: marc ultra	Read Replies (4) of 15132

market musings.Looks like without some more correction here we may be setting the table for the end of the bull market. Sentiment indicators have become a little less bullish suggesting we might be able to go up or bounce around for a while here. If the economy doesn't slow on its own here it looks like the Fed will try to slow money growth through their operations and with a rate hike down the road if needed. We've been talking about a goldilocks economy with moderate growth and no inflation. As growth has continued above trend we felt as long as inflation stays non-existent or falling the Fed can look the other way from tight labor markets and potential inflation. Meanwhile any monetarists on the Fed have been whining about excessive money growth and have fortunately been ignored as the economy continued to look ideal and without inflation. Things may truly be changing now. We had a GDP deflator that while very low increased significantly from the prior quarter. And then the real shock to nirvana was the CPI which showed some broad based price increases. We'll have to see if this was a one time fluke but the direction of inflation seems likely to have changed. While inflation is no longer declining if not robustly growing, in the rest of the world we seem to be losing the fear by the Fed of tanking emerging markets with a tighter policy. The problem is if you look at the factors that cause a bear market at least as outlined by Bob they mostly seem to all come at you together. Rapid growth and high inflation leads to tight money and rising rates.As to the one that might be separate, overvaluation, I think we can all agree that the market is very richly valued particularly at our current long bond yield. This all leaves me in a very cautious position with an unusually high cash position but not pulling the plug yet. For that I'll wait for Bob and/or keep an eye on interest rates and see if we get a little rally and push sentiment to a very extreme level Marc

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