Crystal ball , in times of doubt about the US Economy and interest rates it always helps to re-review Wayne D. Angell's classic editorial from the Wall Street Journal.
Wayne D. Angell, formerly a Federal Reserve governor, is chief economist at Bear Stearns.
" For 40 years, policy makers inhabited a dismal world which believed that faster
economic growth was bad and a higher unemployment rate was good. These
notions, which stem from the view that rapid economic growth causes inflation,
spawned a mind-set in which every boom was seen as a bubble in the making -- the current boom included. But the evidence that I see does not suggest a bubble;
rather, it indicates that we have at last arrived in a new-era economy, one in
which information technologies and sound money fuel long-term, noninflationary
growth .
Message 7691186
You said
30 yr BOND HIT 6%, do not PANIC! Down EARLY, RALLY later.
Those fund managers sure know how to pick their quarters, look at the highs, just
after the quarter Q1, Q2 ending, thats because they pay their estimated taxes! Q3 is
the start of the half year (HY), and thats why this is more critical. Fund managers
always like to end the quarter with Internets in their portfolio, We have some much
of this hot stock, see...., and then the start of the quarter they dump it, they do not
need to impress their clients anymore. Supply and Demand affects Price, this is
fundamental economics 101. That is why you need to look at the percentages of
stocks of when you buy in FIRST, then SECOND look to the volume NOT
PRICE PER SHARE. A high price in dollars, say $225 is a killer psychologically,
who is going to buy in, even though its the PERCENTAGE that matters, however,
psychology dictates SPLITS, they need that lower price to induce buyers, to
INDUCE VOLUME, the more VOLUME on the uptick, the more DEMAND and
the PRICE naturally rises, it means NOTHING FOR LOW VOLUME TO PRICE
A STOCK, up or down, so what, when the SUPPLY (VOLUME of SHARES) is
going up or down, thats what tells you where the TREND of the price is going to
be. Thats the DEMAND or MOMENTUM curve in abbreviated form.
However, the interest rate at 6% is going to cause many LONG TERM investors to
move into safer investments, like the bond, rather than riskier stocks, with high
muliples like internets. Why, because companies borrow, for you, me and the
banks, and the more they pay in interest rates, the lower their net earnings. (Not that
Internets have NET earnings anyway, but it does affect their SALES REVENUES
too, because companies with earnings can not afford to buy their goods or services
either.)Lower Sales Revenues or Lower Earnings means the P/E or multiple is
destined to crash the price.
So the 30 year bond hit 6%, do not panic, but be careful today.
Be nice to people.
I am,
Truly yours,
-Crystal ball
I know you can all hold out until June 18th and 29th when Greenspan will tell us all
how
well the Fed has done at rebuilding asia, for all the importers. Exporters, please hold
on,your day will come.
(For those of you new to the concept of P/E or high Multiple Internet Stocks and
the
concept of "Discounting" or calculating PV Present Value based on changes in the
30 year bond yield, call your CPA now.
Know what you are doing and what your risks are before you proceed further. If all
else fails, you can take a net loss of $3K per year and carry forward the rest of
your losses.
You are in the third Quarter, Q3 think ahead, August 31st is not close, but ahead. |
