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

To: HairBall who wrote (30661)	10/19/1999 8:50:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 99985

inflation: 1987 vs. 1999: OK, so the number is 0.4% for September 1999. Let's make the optimistic assumption that that rate doesn't get any worse, and is just maintained for the next 11 months. That would give us a 12-month inflation rate of 4.8% (0.4 X 12), in August 2000. I'm ignoring compounding. The past-12-months inflation rate bottomed in early 1998, at 1.4% So, that gives us a total increase in the inflation rate of 3.4% (peak 4.8 minus trough 1.4), over the course of 2 1/2 years. At the start of 1987, inflation troughed at 1.0% I'm reading this off a graph, so I may be slightly off. If someone has more precise data, please correct me. By the time of the October 1987 crash, inflation was running at 4.5%. That's a total increase in the inflation rate of 3.5%, in less than a year. After the crash, the inflation rate continued to increase, peaking at 6.2%. But it was the initial 3.5% increase in inflation, together with the associated increase in interest rates, that was the main cause of the 1987 crash. So, it looks to me like the inflation increase now is probably going to be of the same magnitude as in 1987. But it will be spread over a time period about 3 times as long. In the 1987 crash, the market PE (trailing, of S&P 500) went from 17 to 13. Roughly a 30% compression in the PE. So far, the peak PE for 1999 (again, this is trailing, of S&P 500) is 31. A 30% compression brings us to a PE of 22. And on this wonderful news, the market rallied today. Comments? Is my historical data correct? Is it fair to compare 1987 and 1999? Will inflation stay at a 0.4% per month rate?

To: HairBall who wrote (30661)	10/19/1999 9:46:00 PM
From: Greg Jung	Respond to of 99985

"Microsoft manages to beat expectations" This headline just gave me a chuckle since I just picked up this morning's Washington Post, a day before the MSFT earnings. If they can rally techs tomorrow on the Microsoft earnings, they really are Masters of the Universe. It is a curious sight to see selected stocks massively punished for the slightest of improprieties, a disrespect for all stocks is implied by the behavior. Mostly I suppose it is hedgies pulling the trigger while looking for issues from which to raise cash: if you pop up on the radar screen during hunting season, better duck!. This ought to make for an explosive January or December effect in some parts.