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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: HairBall who wrote (25009)	9/7/1999 9:16:00 AM
From: 10K a day	Respond to of 99985

' Disclaimer: The above is my opinion only and I reserve the right to be wrong. ' LOL! LG...<g> I reserve the Right to agree with you.... I Also Reserve the Right to be wrong! LOL!

To: HairBall who wrote (25009)	9/7/1999 1:24:00 PM
From: russet	Read Replies (1) \| Respond to of 99985

I think, as long as the Fed keeps trying to jawbone the market down, I think the market will trade in the current range, or rise. As in the 1920's, most market participants think new technology will keep pushing the stock market up, and the Fed can solve any short term problems impacting on the economy. People with these beliefs will continue to buy the dips and support the market in times of weakness. If the Fed reversed policy, and said we don't care about the markets anymore, perhaps the markets would become even more neurotic, and sell off quickly. The thought that the Fed doesn't care if the market goes up or down, takes the safety net away from the market. Oops, it appears the view is shared, http://www.siliconinvestor.com/readmsg.aspx?msgid=11173368

To: HairBall who wrote (25009)	9/7/1999 4:05:00 PM
From: Les H	Read Replies (1) \| Respond to of 99985

St Louis Fed sees T-bonds challenging stocks ahead By Isabelle Clary NEW YORK, Sept 7 (Reuters) - U.S. equities have been on a roll but stock investors may be heading for far smaller returns, according to a financial market expert at the Federal Reserve Bank of St. Louis. ``Any objective measure -- the (U.S.) interest rate climate or the prospects for the dollar, U.S. economic growth and corporate earnings -- is not terribly bright and yet the stock market seems to have not taken much account of that,' St. Louis Fed economist William Emmons told Reuters. ``There is concern about some increase in inflation...but stocks seem to be immune to that,' added Emmons, who authored a number of research papers on the relationship between the economy and the stock market. U.S. stocks soared on Friday on news of a slowdown in the pace of job creation in August while evidence of wage inflation remained scant. In late afternoon trading Tuesday, the Dow Jones industrial average had given up some of these gains and was down 54 points at around 11024. The St. Louis Fed economist said historic series of stock market and economic data showed the total return on stocks -- dividends paid plus stock price appreciation -- have maintained a fairly steady relationship with nominal Gross Domestic Product (GDP) growth. Several series of data through 1997 -- some dating back to 1926 -- showed stock price appreciation roughly matching nominal GDP growth. At the same time, total return on stocks exceeded nominal GDP growth by about 4.5 percentage points on the average. Over the past two years, that historic pattern has been altered by high stock valuation resulting in lower dividend returns as corporations do not hike their dividends in line with the soaring stock price appreciation. ``If you assume nominal GDP growth of 4- to 5.0-percent over the next quarters, and dividends yields of 1.0 or 2.0 percent, total return on stocks of 6.0 to 7.0 percent is a pretty reasonable expectations for stocks returns,' Emmons said. Under such a scenario where stock gains would slow down in line with a slowdown in nominal GDP growth and dividends remain low, the total return on stocks would stand a serious challenge from Treasury bond yields. ``But bonds are also at 6.0 percent,' added Emmons, referring to the benchmark Treasury 30-year benchmark bond yield currently at around 6.07 percent. ``The party for stocks seems to be over but people won't go home because they just don't seem to know it's over yet,' added Emmons who said a bond yield steadily above 6.00 percent would be attractive to many investors if stocks are topping out. The St. Louis Fed economist further pointed out that a 6.0-percent bond yield would be a serious competitor for stocks if the U.S. economy slows down and stock price simply stabilize at current levels. And a 6.0-percent long bond would be a real threat to stocks in the event of a Dow Jones correction. ``It is not reasonable to ignore the possibility of a correction in stock prices... 6.0-percent (total) return (on stocks) is the optimistic case. We are at a time where the risk-return trade-off has long passed,' Emmons concluded.