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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (40384)	12/4/2000 1:32:40 AM
From: 16yearcycle	Read Replies (1) \| Respond to of 70976

No; according to Yardeni, we would need earnings to grow at 16% instead of the estimated 11.9, and the 10 year bond yield to go to 4.9% from it's current 5.47%, and then the 16% overvaluation would be gone, so I stand corrected. My apologies. The formula is at the bottom of the page and in other places on this great site: yardeni.com

To: Gottfried who wrote (40384)	12/4/2000 2:20:13 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 70976

Gottfried, Eugene: re interest rates: Yes, that is a useful site. I stopped following 30Y Treasuries a while ago, when they disconnected from other rates; the long bond doesn't tell us much anymore, IMO. Rather, I think junk bond interest rates, and mortgage rates, are a better indicator to follow, to tell us what's going to be happening with the overall economy. In fact, a "flight to quality", where investors dump junk bonds, and buy Treasuries, may send Treasury interest rates down, while companies find it increasingly difficult to fund expansion plans. For instance, all the telco startups who are (or have plans to) bring broadband to every home, office, car, and cellphone (or Palm Pilot). This buildout will directly use a lot of chips, and will create markets for all kinds of devices that use even more chips. When those telcos suddenly find themselves unable to raise any financing, the buildout slows dramatically. First, the telco stocks suffer. Then the telecom equips, then the chip companies, and then........the semi-equips. The damage moves up the chain of suppliers and customeres. And it begins when consumers stop consuming, and banks stop lending, both of which we are seeing now. The question is, how much of this is in the stocks, and when will the credit spigot get turned back on? I'm betting the answers are: almost all of it is in the stocks now, and the credit spigot will get turned back on in about mid-2001. My purchase of AMAT now, is a 6-month anticipation of that. I don't really see a Fed loosening in 2001. There is much wishful thinking in stock investor's predictions about what the Fed will do. Stock investors are more concerned about stock prices than inflation, so we always prefer a looser Fed stance, and "hope springs eternal". I catch myself doing wishful thinking too. For instance, I thought the Fed would go to a neutral bias this last time, but they didn't. I thought the signs of an economic slowdown were so obvious, that it was obvious the risks are now more toward recession than inflation. But the Fed doesn't see it that way. They still are more worried about inflation. So I expect the move toward a neutral bias, and then actual lower rates, will take longer than most of us expect (and hope). Barring a 1998-style crisis, my cloudy crystal ball says: no Fed interest rate changes in 2001, just a move to a neutral bias. But if AMAT doesn't re-establish the 40 support line real soon, I may sidle back to the sidelines. If 40 isn't support, then the next stop is 30.