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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: cfimx who wrote (9437)	12/28/1999 6:34:00 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78523

I wonder if the importance of interest rates has more to do with particular industries and for individuals, where they are in their investing. I'll agree that interest rates are as a gravity pull. But I also believe I see that most people who want to invest are investing in stocks. Stocks are the place to be. Not gold, not oil/gas partnerships, not real estate, and not bonds. Specifically tech stocks. And the companies that many people are investing in, are imo, mostly immune from rising interest rates. These tech companies are cash rich. With very little ltd. Unless their customers get hurt by rising rates (and so curtail purchases orders), I don't right now see how many of these tech companies can be hurt if rates go up another percent. I had to dig into Barron's to see the latest interest rates. Here's what I found: One year changes. Fannie Mae 30yr. fixed conventional: 8.04% now vs. 6.86% yr. ago Merrill Lynch 5 yr. certificate 5.36% vs. 4.41% Savings Bonds (EE) 5.1% vs. 4.6% Prime rate (base) 8.5% vs. 7.75% I say if you are a house buyer or house seller, you care about interest rates. And if you are an investor in value stocks, you care about interest rates. Because maybe you use discounted cash flow calculations or maybe because many value stocks have debt that needs to get rolled or else because these companies are on thin margins that really suffer when variable debt is adjusted or customers reduce their purchases. But for tech stock investors, if they don't succumb to the media hype about Fed tightening, they are in pretty good shape if interest rates continue to rise. And for me, continuing with my thesis earlier, I see interest rate increases as one more reason why there is/could be a movement of investment funds from value stocks, from garp stocks and into tech stocks - whether that is into conventional stuff like Sun Micro, MSFT or into internet e-tailers or B2B or broadband stuff. When there are so many stories of so many people making so much money in tech, right now my opinion would be that if rates go up another percent in January, people would still be pumping money into tech on their dips, while value stocks will drain and arbitrage plays (with which I suffer as rates climb) will blow up. Aside: gee, 5% on a EE Bond doesn't look too bad actually. Some fed. tax deferral and free from state tax too? Hard for me to give up 8-13 percent in reits for it though. Paul