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To: Mike Buckley who wrote (44633)	7/18/2001 9:30:18 AM
From: techreports	Read Replies (1) \| Respond to of 54805

If I'm completely out to lunch about this, the least we should learn is that the next time there is 5% growth in the economy accompanied by a huge increase in the market caps of companies and the lowest unemployment in decades, it's likely that an inflation-fighting Fed will raise rates and "cause" the same situation all over again. If the magnitude of all those events ever recurs again, and if an investor believes the Fed is going to act the same again with the same consequences, that investor would be nearly crazy to leave his/her assets in the stock market. I don't know if this is correct, but i was told the stock market has never gone up when the FED raises rates. I'll never fight the FED.

To: Mike Buckley who wrote (44633)	7/18/2001 9:55:24 AM
From: Eric L	Respond to of 54805

--Mike Buckley << If I'm completely out to lunch about this, the least we should learn is that the net time there is 5% growth in the economy accompanied by a huge increase in the market caps of companies and the lowest unemployment in decades, it's likely that an inflation-fighting Fed will raise rates and "cause" the same situation all over again. If the magnitude of all those events ever recurs again, and if an investor believes the Fed is going to act the same again with the same consequences, that investor would be nearly crazy to leave his/her assets in the stock market. >> Formatted, nicely. Printed out. Inserted under the glass of a picture frame in my office. Eric--

To: Mike Buckley who wrote (44633)	7/18/2001 10:22:47 AM
From: Stock Farmer	Read Replies (2) \| Respond to of 54805

Hear Hear!! Mike, as usual a well articulated and reasoned post. I would only add that it seems to me that the bubble valuations were pinned on growth. Growth driven because the customers of our fab few (or customers of theirs, transitively) were flush with capital and spending wildly. Nothing to do with the businesses themselves, everything to do with the upstream food chain and the capital multiplier effect!!! When the source of such cash flows is examined we see at its root an unbelievably massive infusion of almost a trillion dollars of DEBT into a handful of players in the telecom space over a period of a few years. The likes of which we have never seen. A few scratches of a dull pencil on the back of an envelope will show that servicing a trillion dollars of debt is a smidgen larger than the telecom industry can support through reasonably margined services. Particularly given the parallel tendency for them to deliver services at prices rapidly approaching free! Good grief. Rubbing only a few neurons together one must wonder at the probability of maintaining this level of spending. Let along growing it at even 10% for the forseeable future, let alone doubling it next year! Now, to be fair, this tributary effect was not obvious except to those who were students of macro capital flows. Those who just looked at a specific business would have no insight at the upstream effects. Particularly because so much was also flowing into, through and from those "old economy" dinosaur companies that were becoming increasingly ignored!! So what was inevitable (in hindsight) was that trillions of dollars of evanescent market capitalization were doomed to evaporate as slowly or as quickly as the market realized it's error. Whether or not it was AG or someone else who shouted "The Emperor Has No Clothes"! The evaporation was not overnight. It was not sudden. It took place over a period of many months and it may not even be finished at this point. Who is to say that it would not have occurred much faster or slower if the Fed had stood aside? Seems to me that fiscal gravity has been doing an ample job of fighting the Fed, despite snappy sound-bite wisdom to the contrary. Our Public Enemy #1 candidate, Mr. Alan Greenspan just happens to be standing in a convenient spot while all those who claimed brilliance from capital "gains" on the way up are crying "foul" on the way down. I think it's also worth noting that his responsibility is to the financial system and to keep it working, not to make sure that every Tom, Dick and Harry makes a profit. Some would say that by the mere continued existence of our financial system, it is hard to criticize his performance. At least against his job description. John.

To: Mike Buckley who wrote (44633)	7/18/2001 10:26:02 AM
From: areokat	Read Replies (1) \| Respond to of 54805

>>if an investor believes the Fed is going to act the same again with the same consequences, that investor would be nearly crazy to leave his/her assets in the stock market.<< I agree that the investor should increase cash when the FED starts jacking up rates and yes the FED will do it again. I think that we missed the cue when the FED started raising rates this time around because the FEDs had lowered rates in response to the Y2K scare and most of us thought the FED could engineer another soft landing. The difference was the economy wasn't weak in 98-99 but there were definite signs of economic weakness in 2000 yet AG kept stomping on the brakes clear into November of 2000. The rule of thumb is if the FED raises rates at least 3 times in a short period of time, the market stumbles (Edson Gould in the 70'said that for one). So, in 2003-2004 will the FED do it again?? But I confess, this one went right by me too. Kat

To: Mike Buckley who wrote (44633)	7/18/2001 10:28:12 AM
From: areokat	Respond to of 54805

Delete Duplicate

To: Mike Buckley who wrote (44633)	7/18/2001 11:08:26 AM
From: chaz	Respond to of 54805

Mike: If I recall correctly, on the very day you were telling us things were over valued, QCOM reached it's high. If 5% economic growth is unsustainable, how sustainable is a company's 100% growth? Most of us were giddy over the "new" economy, and all the while we were fighting the fed, and the tape. My losses are my fault. Chaz

To: Mike Buckley who wrote (44633)	7/19/2001 3:29:21 PM
From: 100cfm	Read Replies (1) \| Respond to of 54805

Mike I agree with you that we'll never know and that it will be a debate that will rage on for a long long time. All I'm saying is that there was no case history that 5% growth was such a horrible thing with no sign of inflation. I could accept his actions if there was inflation but there was none. I can even accept that 5% was dangerous and that it needed to be scaled down but AG acted as if it was a species threatning disease. I also agree whole heartedly that if the economy was to ever reach 5% again then we would be crazy not to pull our money from the market and retire or in your case retire from the market. But I think we will see an end to the AG debate far sooner then we will see 5% growth again. 100