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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: quasar_1 who wrote (68)	10/23/2000 4:01:38 PM
From: swisstrader	Respond to of 74559

Damn!...that was good!...as a side note, you should post more often...we need more informed insights.

To: quasar_1 who wrote (68)	10/23/2000 4:10:45 PM
From: ibg	Respond to of 74559

nice post.

To: quasar_1 who wrote (68)	10/23/2000 4:20:26 PM
From: excardog	Read Replies (2) \| Respond to of 74559

quasar you state: <The only fly in the ointment has been rising oil prices. But this is a temporary phenomenon, the last gasp of the industrial age. Oil prices are not as intrinsically tied to corporate costs as they were during the shocks of the 70’s so this becomes much less of a sticking point.> You are not alone with your belief's as I have heard this stated by the spin doctors on CNBC as well. I tend to disagree ,so many sectors of our economy are still tied to the price of oil and not just transportation. Procter and Gamble reported lower guidence due to rising oil prices all those soaps and plastic bags we use each day are affected. Textiles manufacturing uses oil and on and on. As long as the manufactures absorb these costs you are right it won't have any effect but how long do you think shareholders are going to buy that? PG announced across the board price increases of 5% to 10% that went into effect this month. Inflation is on it's way, and not just from oil look at all those labor strikes we've been hearing about. The increased labor costs are bound to be passed along it's just a matter to time. Although I'd like to believe in your deflation scenario the reality in my opinion is just the opposite. When and if Mr. Market takes notice and the US Dollar as you say starts to roll over that's the time one might pick up their chips and walk away from the table. Either that or one may not have any chips left should they stay too long. JMHO Regards ps: nice post

To: quasar_1 who wrote (68)	10/23/2000 4:33:16 PM
From: tradermike_1999	Read Replies (1) \| Respond to of 74559

quasar - great post. I'll print it out later this evening and look through it and give you the answer you deserve. Been hoping to see a bull pop in. Right now going to look through some stocks, post any interesting news here, and get a few drinks over Monday Night Football. Will give you a detailed answer late tonight or tomorrow.

To: quasar_1 who wrote (68)	10/24/2000 1:17:17 AM
From: SirRealist	Read Replies (2) \| Respond to of 74559

The smaller amount of companies that remain will be incredibly prosperous. They will in essence become world corporate states. They will rely on the small entrepreneurial firms to take the risk, while they aggregate the winners into their massive global enterprises. The small companies that succeed will be moon shots. The rest will be buried or absorbed into the matmos Sam Walton defined this perfectly in practice. It will be interesting to see the action on the populace & its reaction. Because I don't believe the corporate model is more sustainable than all governmental models. However, I do lie awake at nights wondering if JDSU is God.... <VBG>

To: quasar_1 who wrote (68)	10/24/2000 8:21:48 AM
From: Tatnic	Read Replies (2) \| Respond to of 74559

Hate to quibble with an optimistic, bullish post but I do disagree to some extent: Earnings: >>That hardly matters at all. What matters is the psychological state of the next marginal buyer/seller. Contrary to popular belief there is almost no correlation between perfect earnings forecasting ability and stock picking performance. This was detailed in a study by Robert Colby and Thomas Myers in The Encyclopedia of Technical Market Indicators.<< In my opinion, earnings aren't as important as interest rates, but they do give a reading of the economy's overall health. Still healthy and doing just what the FED wanted...i.e, growth is slowing somewhat. That's good. >>>The economic slowdown has only begun. That is pure speculation. So far we only have a slowing in growth. Growth rates are still at the high end of Fed targets. The high world oil prices are a sign of strong world economies not weak ones.<<< The problem here is that while its true that higher oil prices are an indication of a healthy world economy (from increased demand), if they stay at these levels for too long it will put a halt to this world-wide recovery in a heart beat. Most of the third world's economic growth is still very much dependent on oil. I believe we are seeing signs of a stumble already. It doesn't take much to kill a fledgling recover. >>>Banking sector looks a little ambigious at this point... I agree. It is telling us almost nothing. The T-bond and note markets however are pointing to falling rates. The Fed can not disregard this forever. In the end they must follow the lead here.<<< No need to make it more complicated than it really is...the banking sector does poorly in a rising rate environment and will start looking good at the first hint of rate cuts by the FED. The problem now is that no one knows for sure when or if the FED will cut. As for the bond market, the FED's intervention has thrown that all askew. >>>Sectors such as retail, construction which lead the broad market - dependent upon consumer spending - are dropping which isn't a good sign. Actually home-building stocks have done quite well through this downturn. Retail has been weak. The whole retail concept of brick and mortar distribution is in the preliminary stages of chaos. There will be some clear winners here (WalMart) but also some clear losers.<<< HD's profit warnings are the beginning signs that housing is slowing somewhat. But remember, thats what the FED wanted to happen..put a damper on the run-away economy to head off inflation. Not such a bad thing. As for the whole brick and mortart distribution being in a state of chaos, I would tend to think that brick and mortar is much better off than etailers such as amazon et al. Those are the retailers that are in a state of chaos and desperation, not the traditional brick and mortar bunch. >>>The fundamental underpinnings of the bull case come from the torrent of money constantly pouring into the market . This is primarily due to the baby boomers dumping money into their IRA’s and 401K’s. The boomers are also the recipients of the greatest wealth transfer in US history. As their parents pass on they leave vast sums of real estate, cash and stock to their heirs. This generation, who have primarily grown up in a positive investment environment have no qualms about equity participation, unlike their parents who were reeling form stories of the last Great Depression and two world wars.<<< ....'73~'74 was a pretty desparate time for this country. Ugly bear market. I also believe that alot of people got pretty mangle this year and that you won't see as much money being thrown at the market. Certainly the net stocks are not going to attract the great gobs of speculative money that they did in recent years. That's gone. >>>The other torrent comes from strong dollar inspired buying from foreign investors. While many decry the balance of payment problem I see it as a non issue. The excess money sent abroad comes right back into the US as investment. As long as the dollar remains relatively strong this will continue. It is dollar weakness which should be feared. A strong dollar is a sign of US economic strength not weakness.<<< I agree with that. While it may hurt some multi-nationals it is desirable IMO. >>>Goods and services are presently deflating. This is due to falling global business costs through information technology and rising global competition. The only fly in the ointment has been rising oil prices. But this is a temporary phenomenon, the last gasp of the industrial age. Oil prices are not as intrinsically tied to corporate costs as they were during the shocks of the 70’s so this becomes much less of a sticking point. The commodity based inflation/deflation cycles described by the Kondratieff Agrarian/Industrial cycle are no longer relevant. This is an information age. The fear will become global deflation, not inflation. This is what the Fed fears most! This is where corporate margin pressure can come from. This is where the bear case resides.<<<< I hear this text book mantra all the time...i.e., that oil prices are meaningless today because we are in a new economy where oil isn't as important. This is such BS. Everything is still dependent on oil. EVerything you see in your office or the stores or anywhere for the most part is still dependent on oil. The biggest difference between present day and 25 years ago is that we have become so much more efficient in our consumption, but at the same time we are getting bigger and bigger so the net change in consumption keeps going up, not down. Never mind us, the third world is desparately dependent on oil and oil prices since they are even close to us in energy efficiency. They will fold up shop if the prices remain at these levels for much longer. >>>Margins will be simultaneously squeezed by greater competition and bolstered by rising efficiencies. Unit shipments will rise. Demand growth will continue. Competition will increase. Trade barriers will become ineffective. This is why other currencies are falling. They are clinging to industrial age economic principals while the world has dramatically shifted in front of their eyes. What will happen is that many companies will fail not because of global recessions, but because they fail to grasp the competitive truth. This is the main reason Europe (Euro) is failing. <<< I disagree with your reasoning behind the Euro's weakness. Its not that complicated to figure out if you've ever been there. Its a simple matter of business. Look at all the weak, business hating, socialist countries in the Euro. France and Italy being the worst offenders. There is no way in hell the Euro will ever amount to anything as long as those socialist countries are members. That's why Great Britain has resisted joining them. Why would a great, capitalist country want to dilute their "stock" with a bunch of socialist? >>>The smaller amount of companies that remain will be incredibly prosperous. They will in essence become world corporate states. They will rely on the small entrepreneurial firms to take the risk, while they aggregate the winners into their massive global enterprises. The small companies that succeed will be moon shots. The rest will be buried or absorbed into the matmos.<<< Lot of fluff there....can you translate that? >>>The real long term question is will the US be able to compete if/when the second and third world get their act together. This will only be answered in the fullness of time.<<< Compete? ARe you joking? The US is the clear leader in all that is business. We are the envy of the world. Do you see many US engineers and scientist flocking to India to look for jobs? How bout France? We are and will continue to be the magnet for all who seek a better life and better opportunities. The real long-term question is can we continue to grow our economies and quality of living without completely destroying our environment. That's the real challenge facing the world in my opinion, and that will be a good place to look for some interesting growth companies now and in the future.

To: quasar_1 who wrote (68)	10/24/2000 11:02:48 AM
From: tradermike_1999	Read Replies (1) \| Respond to of 74559

Quasar - again thanks for the great post "Godilocks economy". I'll answer your rebuttals(the ones I disagree with) to my points and see what you think: I said: What matter is what future earnings are going to be. You said: That hardly matters at all. What matters is the psychological state of the next marginal buyer/seller. Contrary to popular belief there is almost no correlation between perfect earnings forecasting ability and stock picking performance. This was detailed in a study by Robert Colby and Thomas Myers in The Encyclopedia of Technical Market Indicators. I agree with you completely here. I primarily use technical analysis - charting to determine my investing and trading decisions. I only looks at fundamentals to confirm other decisions I am making. With our discussion on the economy I am not going to sell off or cease buying stocks because of the coming economic slowdown. However, I expect that the technical action of the market will give us its own warning signs and sell signals. I said: Sectors such as retail, construction which lead the broad market - dependent upon consumer spending - are dropping which isn't a good sign. You replied: Actually home-building stocks have done quite well through this downturn. Retail has been weak. The whole retail concept of brick and mortar distribution is in the preliminary stages of chaos. There will be some clear winners here (WalMart) but also some clear losers I think the drop in retail stocks and their earnings is a serious sign and that the power of the Internet to steal consumers from traditional retails is hyped up in general. We can look at consumer spending economic data to settle the matter and it shows a flattening and weakening consumer spending curve. I said: Biotech strength is interesting and does seem to indicate that there is a lot of speculative money in the market and adds to the bull case. You said: I believe it takes away from the bull case. While biotechs do represent a VERY long term bullish case, these stocks seemed overvalued on balance. I don't think many investors realize the very long lead times for biotech drugs. A lot of this is pie in the sky (genomics). I agree that biotechs in some cases have assumed the hot money characteristics of the Internet stocks. At least there is more meat on the bones here. The fundamental underpinnings of the bull case come from the torrent of money constantly pouring into the market . This is primarily due to the baby boomers dumping money into their IRA’s and 401K’s. The boomers are also the recipients of the greatest wealth transfer in US history. As their parents pass on they leave vast sums of real estate, cash and stock to their heirs. This generation, who have primarily grown up in a positive investment environment have no qualms about equity participation, unlike their parents who were reeling form stories of the last Great Depression and two world wars. The other torrent comes from strong dollar inspired buying from foreign investors. While many decry the balance of payment problem I see it as a non issue. The excess money sent abroad comes right back into the US as investment. As long as the dollar remains relatively strong this will continue. It is dollar weakness which should be feared. A strong dollar is a sign of US economic strength not weakness. Goods and services are presently deflating. This is due to falling global business costs through information technology and rising global competition. The only fly in the ointment has been rising oil prices. But this is a temporary phenomenon, the last gasp of the industrial age. Oil prices are not as intrinsically tied to corporate costs as they were during the shocks of the 70’s so this becomes much less of a sticking point. The commodity based inflation/deflation cycles described by the Kondratieff Agrarian/Industrial cycle are no longer relevant. This is an information age. The fear will become global deflation, not inflation. This is what the Fed fears most! This is where corporate margin pressure can come from. This is where the bear case resides. Margins will be simultaneously squeezed by greater competition and bolstered by rising efficiencies. Unit shipments will rise. Demand growth will continue. Competition will increase. Trade barriers will become ineffective. This is why other currencies are falling. They are clinging to industrial age economic principals while the world has dramatically shifted in front of their eyes. What will happen is that many companies will fail not because of global recessions, but because they fail to grasp the competitive truth. This is the main reason Europe (Euro) is failing. The smaller amount of companies that remain will be incredibly prosperous. They will in essence become world corporate states. They will rely on the small entrepreneurial firms to take the risk, while they aggregate the winners into their massive global enterprises. The small companies that succeed will be moon shots. The rest will be buried or absorbed into the matmos. The real long term question is will the US be able to compete if/when the second and third world get their act together. This will only be answered in the fullness of time. Quasar My reply: The Biotechs are interesting because like you said they are completely speculative, just like the Internets were. Typiclaly towards the end of bull markets the final sectors to move are speculative sectors will little or no instrinsic value. The fact that biotechs are still hot seems to indicate that parts of the bull market are intact. It's not dead yet. One question that is never asked about the baby boomers is what is going to happen when they stop putting money into their retirement accounts and begin liquidating parts of them so that they can retire, live, vacation, and move to Florida? So far the continual pouring of money into the markets by people in there 40s and 50s has created a stable pool of money to support the market. This has also happened in the real estate markets. Once they reach their 60s, which will happen by the end of the decade and they begin to withdrawal money from the market and sell off some of their real estate there will be deflationary aspect to the markets. If there are any signs of a downturn, these people whose retirement depends upon a rising stock market, will be tempted to liquidate their portfolios in the face of a financial crash. This group which has been supporting the market will eventually become a horrible drag on it. I'm talking within 10 years, not tomorrow. I think you are right to focus on the value of the dollar and this is the real crux of the discussion topic. The economy is going to slow down. This is a fact. It's just a matter of how much. Will we get a nice soft landing? It's possible. However, if the dollar drops in value because of economic imbalances in the world financial system, such as the current account deficit, continual collapse of Asian economies, fiscal mismanagement on the part of the next President, then we will have a real crisis at hand and the odds of an extended recession will increase. You say that the fear will be deflation and not inflation. Again you are probably right here. But this is the fear of normal people like you and I. The Federal Reserve has always been more obsessed with inflation rather than deflation and it will be in the future. I'll say more about that in the future.