Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: MrGreenJeans who wrote (10555)	12/19/1999 5:16:00 PM
From: Justa Werkenstiff	Respond to of 15132

MGJ: Re: "The Federal Reserve must be concerned about the wealth effect as a byproduct of the strong equity markets." This is a given. Re: "The Fed wants to see the markets move sideways to lower as to lessen the wealth effect which is contributing to above average GDP growth or GDP growth above 3%." Absolutely, but they want it to move it lower only to the point where the economy shows definite signs of slowing. If they whack it too hard, the wealth effect can work in th other direction as well. But right now it could use and take a kick in the pants on the basis of wealth effect theory. Re: "The question becomes is one or two rate hikes enough to cool off this economy? A hike of quarter of a point at each of the next two Federal Reserve meetings may not cool this economy going forward. Quarter of a point moves do not do all that much in the short-term." Yes, the market is laughing at the FRB at least as far as the Nasdaq is concerned. But the Fed. has fostered this environment and it will be up to them to cool it down. I have no idea if two could do it because three are working through the system now. Re: "Further, as the anticipation of rate hikes become a reality, the tightening is already being anticipated in the bond market, in January and going forward in the months ahead investors will react by selling equities first and asking questions later setting us up for a possible rather nasty correction. Most investors are caught up in the technology mania at the moment." Yeah, but this should be no secret. This is what is amazing about this market. On a historical basis, I think you are right on. But history does not seem to matter at least for now at least in Naz land. But there is a ceiling on the S & P and DOW. Think about it. The S & P is 27% technology and it can't get over SPY 143 with all the hoopla in tech. land. So there are some sectors getting hammered here. Re: "So I guess the question becomes at what interest rate does the equity market start selling off at?" Good grief, the long term bond made a new high on this run and nobody cared in Naz land. I don't know the answer to that one. Sure would make a difference if the Fed. got out from under the Y2K table. Re: "And the better question is why would one want to wait around for an anticipated sell-off if one thinks rates are more likely to go up in the coming months at these levels of economic activity?" The only answer I can think of is the tax issue. You are right IMO. The risk/reward in many sectors of the market is unattractive. Re: "As for me I will be raising more cash the last two weeks in December as this technology mania goes on. The QQQ has reached levels where only greater fools are buying." Well, I have been saying that for about 10% now. If one is buying tech. here, one had better at least start thinking about mental stops. The odds are you will be able many of these stocks at a greater discount at some point in the future. Cash is prudent.

To: MrGreenJeans who wrote (10555)	12/20/1999 11:09:00 AM
From: Wally Mastroly	Read Replies (1) \| Respond to of 15132

Mr.GJ. Re: "..Quarter of a point moves do not do all that much in the short-term..." - Food for thought- IMO, the only way the Fed will get the attention of the Naz investors (who seem to be either laughing at the FED - or oblivious to it) is to do something dramatic. A sledge hammer approach may be needed. Suggest the following possibilities: (A) A half-point increase at 2 Feb. FOMC meeting or (B) Riskier - A quarter point increase after Y2K, but before Feb. FOMC meeting. (Assuming, there are no serious Y2K perturbations by about mid January). Of course, justification by the FED for the above may prove challenging - without another irrational exuberance-type pronouncement. And as Brinker has pointed out, hanging over the FED has got to be the fear that overkill by them could bring on a recession...