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To: pater tenebrarum who wrote (97670)	4/24/2001 5:43:43 PM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 436258

he had to throw a bone in there somewhere.... or he'd be out of a job all together... look who he works for! here's a Hussman comment to richard russell today about the market, its valuation, and risk/reward vs. risk/free rates.... (jeepers do those still exist?) "You mentioned the New Era notion about stocks warranting a zero risk premium. In addition to your own reservation, here is mine. No market that earns part of its long-term return in the form of growth should have a zero risk premium. "As a simple example, suppose that bonds yield 6%, and stocks are priced to deliver a long-term return of 6% as well (say, 5% as long-term earnings growth - which would produce the same rate of price growth if the P/E stays constant - and 1% in dividend yield). "Now suppose that bond yields rise to 7%. Well, for a 30-year bond, that 1% increase in yield would drive the price down by just over 12%. But look at stocks. Since the long-term growth of earnings hasn't changed, the only way to kick the long-term return up to 7% is to drive the dividend yield from 1% to 2%, implying that stocks would fall by half. "The lower the yield on a long-term security, the more volatile prices must be in order to keep that yield competitive. And the only way to dampen that volatility is to build a risk premium. "All of which underscores your views about the risk of a dividend-less market. If long-term interest rates continue to press higher, I suspect that the current 1.25% dividend yield will not stay at that level for long. "Best wishes, John Hussman."

To: pater tenebrarum who wrote (97670)	4/24/2001 5:46:22 PM
From: Box-By-The-Riviera™	Read Replies (4) \| Respond to of 436258

Fed hasn't learned: Don't fight the bond tape! Russell's comment on the fed's recent moves!! now you know why people pay him money! I believe this is why Greenspan suddenly cut interest rates another half percent before the next Fed meeting. Greenspan evidently knows that at these extreme overvaluations, stocks cannot stand rising interest rates. Yet consider this - with Greenspan "gunning" the money supply, this action in turn raises the fear of inflation. Fears of rising inflation impacts on the bond market - and as bonds back off, rates push UP (which they've been doing). So Greenspan is caught between the devil and the deep blue sea. To "get the economy moving again," he drops rates and jazzes up the money supply. But the bond market, fearing that the surging money supply will stir up inflation, thwarts Greenspan by declining, thereby PUSHING RATES HIGHER. So what's the panicking Greenspan to do? The situation is too dangerous, he can't wait for the May Fed meeting - he must move. SO HE DROPS RATES ANOTHER HALF POINT. HE MUST MOVE TO DRIVE RATES DOWN. Looking at the bellwether 10 year T-note (June futures), the KEY level is 103.15. That low was touched intra-day on January 25. Then on April 18 the June T-note declined to hit 103.20. Will the notes break support and sink to new lows? BOOM. Greenspan pulled the trigger and dropped rates a half percent. HE COULD NOT LET THE BELLWETHER T-NOTE BREAK, THEREBY SIGNALING TO EVERY BOND TRADER THE RATES WERE HEADING HIGHER. The T-note rally off the April 18 low of 103.20 has, so far, been weak and unimpressive. So let's watch it. And I'll repeat it, AT THE CURRENT EXTREME OVERVALUATIONS, STOCKS CANNOT TAKE RISING INTEREST RATES. AND GREENSPAN EVIDENTLY KNOWS IT. If the 10 year T-note approaches 103.15 again and it looks as though it might violate support -- it wouldn't surprise me to see Greenspan panic and drop rates again!!