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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Tom Kearney who wrote (4617)	1/5/2001 12:39:23 PM
From: 16yearcycle	Read Replies (2) \| Respond to of 57684

"Gene - you were so on the mark it is scary! Remember this one? Message 12576915; Bill and I then went to the DARN tech conference 3 weeks later, and both he and I came out of that thinking, "well, we will correct but this is very ingrained in our system now, and the fed will figure it out." I would have TEN TIMES as much money as I currently and my 5th consecutive plus 100% year if I had stayed with the shorts, lmt and utilities, that I had the first 6 weeks. Only you and he and a few others here could know how true this is. I won't forget the pain. Here is my autopsy: 1. We had an overvaluation and overspeculation problem, and the economy was too hot. The correct solution was to squeeze money supply back to pre-y2k bubble levels,(Aug 99), raise rates another 1/4, talk tough, and continue to encourage the raising of margin requirements, and not lower rates until posting a below 2.5% gdp quarter, and then only 1/4......then shut the hell up and stay out of it. 2. Instead we got all the above, PLUS even higher rates in the face of the slowdown beginning and then, apocalyptically, tighter supply even with political crisis; current growth of perhaps below 1.5%; Asian and European mini crashes and major slowdowns; and soaring energy prices and tight supply(imagine policies where only nat gas plants can be built?); and a brutal tax crunch induced by draconian capital gains policy(Let's tax the HELL out of investment and not consumption, right?). This disastrous policy finally ends, but not before real interest rates are the highest in 70 years, and money supply actually CONTRACTS at a DOUBLE DIGIT rate, year over year!!!! 3. Now the fed has undermined confidence in the fed, the markets, and investment, and has effectively driven home a point about savings and debt. The last two things are excellent; the first three are very bad. The economic boom was fed by investment and productivity. Now they have to try to reinflate, but they are 4 months too late now. That doesn't sound too bad but they zigged when they should have zagged, in the fall. Even a soft forward statement in October, and then action in December would have stopped this from getting to be this big of a mess. When the bears are tossing around opinions based in fact, which I have NEVER seen before, you have to know how bad this really is. Now, instead of a neutral policy, they will have to be proactive until the economy comes back. This will take at least 3 quarters. To invest right now, you have to make a leap of faith that they won't screw up again and that the market will soon start looking 6 months forward like usual. A better energy and capital gains policy would help, too. Here is my prediction: I think Bush seemed giddy after the meeting with AG. AG is going to support a better cap gains policy and will make reference to energy policies being important, because stable energy prices are good for the economy and make his job easier. And the fed will stay soft. We will work through the problems within 1 quarter and tech will do well then, with individual stocks tracking their own profit growth rates. That would be a very big deal because we have the fastest growing companies in our nations history, but we are talking 25-60% improvements in prime choice stuff after a mild pe reinflation. No more 200% nonsense.

To: Tom Kearney who wrote (4617)	1/5/2001 12:57:09 PM
From: 16yearcycle	Respond to of 57684

I said this too, and in effect this is exactly what I did too. "it is clear to me that the fed will tighten and tighten until the conomy slows, and I'll bet they are real slow to ease the next time we are down to 1% growth. If the market can have a poor year or two, the wealth effect will be diminished. And it isn't everything that is too high, but my favorite techs have gone off the charts and I simply can't own them at these prices. I don't need a crash, but a nasdaq move to 3500 would get things back in range." But, we got a friggin crash. 3500 wasn't a problem for me, even though I lacked discipline this year. We went 40% below what I thought was neutral! What worries me is that we swung 1600 above it and only 1250 below it, but I think the fed being in the game will stop this, once we see some fruits of their labor.