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Non-Tech : Auric Goldfinger's Short List -- Ignore unavailable to you. Want to Upgrade?

To: Kevin Podsiadlik who wrote (4459)	1/3/2000 8:40:00 PM
From: RockyBalboa	Respond to of 19428

Much more if it is real cash value...lol. And fodder for the nerves. That's the difference, also a CMGI or YAHOO can run $20, $30 aftermarket but does not look back very much. ...

To: Kevin Podsiadlik who wrote (4459)	1/4/2000 7:11:00 PM
From: Sir Auric Goldfinger	Respond to of 19428

Stocks Just Noticed Interest Rates are Rising?: Caroline Baum-- Why now? Long-term interest rates have been rising for 15 months. Last year was the worst year in 70 for the 30-year bond. The Lehman Brothers Government/Corporate Bond Index delivered a loss for only the second time in its 26-year history. And stocks just figured this out yesterday? The Dow Jones Industrial Average and Standard & Poor's 500 Index caved in yesterday as bond yields soared to 6.6 percent, 190 basis points above their October 1998 low. It took another 24 hours for the message to sink in at the interest-rates-don't- matter Nasdaq, which plunged 5.55 percent today. European stock markets took it on the chin Tuesday as well, falling 2.5 to 5 percent. Most of the above-mentioned indexes finished the year at a record high. Whether the rise in global interest rates to date proves to be the event that halts the charging bull, particularly the ebullient Nasdaq, or just an interim scare, only time will tell. But one has to question the roots of the sudden epiphany in the stock market. ``If you were to ask someone what stocks would do in response to a 50 basis point rise in long-term rates, he would answer that valuations would decline, all else equal,' says Steve Wieting, an economist at Salomon Smith Barney. ``But all else is never equal.' By Wieting's calculations, about 75 percent of the rise in bond yields last year was the result of stronger economic growth. ``That's good for stocks,' Wieting says. ``If rates are rising solely for growth reasons -- because of increased demand for credit -- and if the return on investment and productivity are high, you may discount earnings at a higher rate but earnings expectations are higher.' Revelation If the Fed is going to tighten aggressively, ``that's not associated with stronger earnings expectations,' Wieting explains. ``It's really about the sustainability of earnings growth.' Aha! It's the expectation that the Federal Reserve will tighten aggressively that has changed. Since Friday? Let's go to the expectations department. On Monday, the February federal funds futures contract fell .02 point to 94.19, an implied yield of 5.81. It took an additional baby step in the direction of anticipating a 50 basis point rate hike on Feb. 2. Then there was the market itself. The yields on active Treasury notes and bonds rose 14-16 basis points. Over the years, I've observed that expectations track price action. If the latter is lousy, the former deteriorates. So if bonds get hammered in advance of, say, the monthly employment report, traders (not economic forecasters) actually start to anticipate a stronger number. Genesis When year-end came and went with barely a Y2K-related glitch, safe-haven trades outlived their usefulness. Latent fears about a possible dampening effect on economic growth, both here and abroad, evaporated. The event that stayed the Fed's hand in December was history. Traders had a free pass to sell Treasuries (at least until stocks tanked on Tuesday, at which point they became somewhat attractive.) It was also an opportunity to book some of the hefty profits from 1999, according to Joe Liro, vice president, equity research, at Stone & McCarthy Research Associates. ``There was no lifting of the veil on the interest rate scenario,' Liro says. ``Capital gains from November and December were deferred. People took some money off the table.' If that answers the question, why now, it begs the question of why stocks have been able to ignore interest-rate increases for so long. ``Mr. Greenspan's `irrational exuberance' is one answer,' says Paul McCulley, portfolio manager at the Pacific Investment Management Company in Newport Beach, California. ``A better one would be that the consensus is looking at stocks not from forward- looking fair value but from backward-looking performance.' Judges This is like driving using the rear-view mirror instead of the windshield, McCulley adds. ``You wake up one day, and you're in a ditch.' Everyone's read the disclaimer that appears on every offering prospectus: past performance is no guarantee of future success. ``As a practical matter, they extrapolate past performance as future success,' McCulley says. When the price action calls such an investment strategy into question, money managers can always point to higher interest rates as the convenient excuse. Which makes you wonder what these folks have been doing all year. (Trading momentum, that's what).