Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: TobagoJack who wrote (5467)	7/2/2001 7:25:40 AM
From: Maurice Winn	Respond to of 74559

<Do you really believe I am the one who ought to sweat, profusely, for the reality that you have correctly observed? We agree on the state of reality. We differ on approach to navigate this reality.> That's a very good start. It's tough enough to agree on reality. What to do about it is full of conjecture and none of my prognostications carry a probability of 1. No, I don't think you really need to sweat. Holding cash is very comfortable. Better than holding shares if there is a bit of a market crunch. Much better than holding shares with margin debt if there's a big market crunch as that leads to wipeout!! But with a Dow P:E of 25, that's in keeping with interest rates, especially with some keen money printing diluting cash and therefore the measuring stick for the Dow. We know very well that they plan to try to print their way out of economic malaise and they have lowered interest rates quite a long way. So, they have given warning to those who insist on holding cash; get out and spend it and invest it is the message the Fed is giving. Some people say "Don't Fight the Fed". Maybe that's a good slogan but I prefer the slogan, "Don't Let a Slogan Do Your Thinking For You". Keep in mind that there have been some very highly inflationary episodes and money can be diluted extremely quickly. While a P:E of 25 is historically high, one should keep in mind that history is not necessarily any guide to the future. People live a lot longer than 1950. Markets are expanding rapidly and there are 5 billion people instead of 1 billion early last century. Those people have a high average income per person. Deflationary tendencies are strong thanks to the productivity bonus and there is no end to that in sight. Economies of scale continue to boom too, with globalisation and billions of Chinese and Indians keen to improve their material position [along with a couple of billion other people]. The cost of designing a widget is now spread over vast numbers of people instead of a few English people at the time of the industrial revolution. 25:1 is a fair enough P:E and in keeping with historic interest rates [even a bit cheaper]. A spread across the index is safer than a country's currency [in my book]. Stuff like that. Mqurice