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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (6246)	6/24/1999 9:15:00 PM
From: MrGreenJeans	Respond to of 15132

Recession Probabilities There is a simple forecasting model used by the New York Federal Reserve, there is a published paper on this model-write to the New York Federal Reserve, 33 Liberty Street, that seems to give fairly good predictive recession results. The model takes the spread between the 10 year bond currently at 6.03% and the 3 month bond 4.71% and based on the spread offers recession probabilistic scenarios. At these rates there seems to be less than a 5% probability a recession will start anytime soon. The 30 year rate according to this model, of which I am an adherent, is a poor predictor of future recessions. Recessions are more sensitive to rates at the lower end of the yield curve. For the record the model has an excellent track record. Further, by comparing the inverse of the the forward pe of the S and P 500 and using it as a divisor over the 10 year bond rate it would seem based on this model equities are overvalued by approximately 59%.

To: Justa Werkenstiff who wrote (6246)	6/24/1999 11:17:00 PM
From: Hank Stamper	Respond to of 15132

Justa wrote: "Green man is going to slow this sucker down unless the overseas markets buckle again in the face of rising rates. He will do it alone or the bond market will do his work for him. He does not care if he does it or the market does it." Yeah. I keep reminding myself that Brinker (the old fashioned fuddy duddy Brinker, not the young whipper snapper Brinker, Jr. who is hip and follows the new "earnings-don't-matter" wave) has been repeating that higher broad market P/Es requires lower rates. I presume that the converse would hold true: higher rates require lower P/Es. Uh,... except that earnings don't matter. They always have in the past but now we got the internet! Ciao, David Todtman

To: Justa Werkenstiff who wrote (6246)	6/26/1999 12:47:00 AM
From: Lars	Read Replies (1) \| Respond to of 15132

Justa, >>> Yo, yo Lars. Get the word out. The Fed. does not have to tighten more than once because the long bond increase to 6.15% plus is starting to cause immediate pain as you noted. The longer this Fed. dance goes on, the more the risks will shift towards a recession nine months out. Then we all will be worrying about the earnings again. >>> Yeah...this stuff is getting to be ridiculous. Just give me a good correction! BTW, I don't know if we will get Wally. He is one tough negotiator.