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

To: marc ultra who wrote (6501)	7/2/1999 1:27:00 PM
From: MrGreenJeans	Read Replies (1) \| Respond to of 15132

Run that by me again Fed giving the economy the benefit of the doubt By Dr. Irwin Kellner, CBS MarketWatch Last Update: 11:21 AM ET Jul 2, 1999 Kellner's forecast Previous Kellner gems NEW YORK (CBS.MW) -- Let?s try to make sense about what?s going on. Federal Reserve Chairman Alan Greenspan is concerned that the economy is growing so fast that it could lead to a new round of inflation. He is also worried about equity market valuations, fearing that "irrational exuberance" has lifted stock prices way beyond reasonable prospects for corporate profits. And it doesn?t take a rocket scientist to conclude that the soaring stock market lies behind the economy?s strong rate of growth, witness the fact that, for the first time since the Great Depression, people are spending more than they are earning (see my column of June 29). Not surprisingly, Mr. Greenspan warned the markets that it was time for the Fed to move "pre-emptively" and raise interest rates a tad, to ensure that the economy doesn?t overheat. The markets thus braced themselves for a modest hike in rates. And since such an increase wouldn?t by itself do much to curb spending, the markets expected the Fed to signal that this increase would not be the last until they became rationally exuberant. So what does the Fed do? It hiked the Federal funds rate by a quarter of a point?but shifted its bias from further tightening, back to neutral. See related story. And what did the markets do in response? They rallied?as you would expect, because they believed that only one tiny rate hike was all she wrote (see my column of June 18). Of course, this puts the markets and the Fed back to square one. Does this make sense? Only if you step back and look at the forest instead of the trees. First of all, the Fed?s bias doesn?t mean all that much. As I pointed out in my column of May 18, biases bear no relationship to future rate changes. In March 1998 the Fed shifted its bias toward tightening?only to cut rates three times starting last September. And during 1994-95, when the Fed was in the process of doubling the funds rate, it maintained a neutral stance?even though additional rate hikes seemed likely. Of course, there is one major difference nowadays, and that is that the Fed now tells us what its attitude toward future rate hikes is at the end of each meeting of its Open Market Committee, instead of forcing us to wait six weeks or more. Second, market rates of interest have already risen by about one percentage point since last October, thus serving to brake such interest-sensitive sectors as housing. Third, Mr. Greenspan is a cautious man, with a tendency to move slowly, when it comes to either raising or lowering rates. Combine these factors with the accompanying statement that talked about the "uncertain resolution of the balance of conflicting forces in the economy going forward," and the reason for the Fed?s move becomes clearer. The Fed is prepared to give the economy the benefit of the doubt, especially since inflation remains quiescent. But if the stock market takes this as a green light to keep soaring at the first half?s clip?don?t be surprised if the Fed moves swiftly and raises rates again. Remember, it?s not nice to cross Chairman Greenspan.

To: marc ultra who wrote (6501)	7/2/1999 1:53:00 PM
From: MrGreenJeans	Read Replies (5) \| Respond to of 15132

Marc: Miscellaneous Ramblings on the Market NAPM index rises manufacturing sector still strong. Labor market still strong based on unemployment numbers this morning. Greenspan reverses bias to neutral-a surprise to most and the financial markets take off. Hard for me to believe this is what Greenspan intended. I posted I. Kellner's interpretation of this reversal and it sums up my analysis. The money supply is slowly tightening incrementally. CIBCR still rising a definite negative in my opinion. Remember not to long ago when it was decreasing? Tonight we may be at the inflection point that Bob often talks about. All three indexes look at this moment to be in record territory. Does one sell here at the top of the market and is this signaling the top of the long bull run? A tough call and that is why we pay Bob for his newsletter.To me being at the inflection point is fascinating in many respects. It separates out the real investors and traders from the amateurs. Separates out the real analytics from the "bull market geniuses." Separates out the successful from the unsuccessful. I am still at 70% equities and 30% bonds and cash. I have followed Bob for too many years not to heed his signal; I will sell when Bob makes the call. In effect being at 30% bonds and cash is hedge against any premature severe downdraft; I am comfortable with this position. My guess is that earnings will come in strongly and Bob will stay the course for the next few weeks. Looks to me like Greenspan has given the equity markets a green light until the next Federal Reserve meeting in August. Finally, as Lars has pointed out when this bull run finally comes to an end there will be some real pain in this market. I know many people who have recently invested for the first time, many who have never been through a bear, many who believe the business cycle is dead, many who believe Greenspan will save the market if it falls by cutting rates, some who are buying houses at what is the top of the market, people on margin that should not be, people who don't know the difference between a bond and a stock, people who believe they have a right to the stock market gains they see on paper. Lemmings are giving me advice, the mother-in-law is an expert, lawyers I know who believe they are really security analysts, construction workers who think they are daytraders...to me it is beginning to look surreal. I often tell others not in the business this may not be the best time to lump sum in the market-their response is a smirk-they are probably thinking what does he know. When this market falls it is not going to be pretty. The lawsuits will fly because those "bull market geniuses" will sue claiming they were really misled. Stay tuned. Don't feel bad when the bull market ends some real, very real money will be made by shorting on the way down. Get ready...I know you are... Sorry for rambling.

To: marc ultra who wrote (6501)	7/2/1999 11:00:00 PM
From: Carl R.	Read Replies (2) \| Respond to of 15132

Well, we did get my internut rally: techstocks.com but we didn't quite make my targets for today: techstocks.com I think this rally will run through Wednesday or maybe longer, and that we will make my targets Tuesday. Nevertheless, all this "gunslinging" is getting too stressful for me, so I'm going to take a break until October or November. I moved to 25% cash today, and I'll probably move to 75% by the end of next week. I've made enough for this year already, anyway. Now I need some suggestions from you guys. I would like some suggestions for high yield no-load funds with a reasonably short duration to reduce interest rate risks. This is for a Roth IRA, so I don't want a tax-deductible fund. Thanks, Carl