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 : Coming Financial Collapse Moderated -- Ignore unavailable to you. Want to Upgrade?

To: EL KABONG!!! who wrote (604)	9/3/2001 2:58:33 AM
From: EL KABONG!!!	Read Replies (2) \| Respond to of 974

usatoday.com 08/31/2001 - Updated 11:12 PM ET Where some see gloom, others see opportunity By John Waggoner, USA TODAY Not everyone on Wall Street is mired in gloom and despair, even though the stock market has been falling since March 2000 and the Dow is below 10,000 again. You're supposed to buy stocks when everyone else is running away. In fact, many experts say that stocks could already be bottoming — and that there are good reasons to be optimistic: Interest rates. The Federal Reserve cut the key overnight Fed funds rate to 3.5% Aug. 21 — the seventh rate cut this year. Lower rates make it cheaper for consumers and businesses to borrow, which stimulates the economy. The economy typically takes 12 months to react to lower rates, says L. Roy Papp, manager of Papp America Abroad. "We'll feel the effects at the beginning of the year," Papp says. Savings rates. Lower interest rates also make alternative investments, such as bank CDs and Treasury bills, look less appealing. Money market mutual funds now have an average 7-day yield of just 3.12%, according to iMoneyNet, which tracks the funds. Currently, $2.1 trillion is cooling its heels in money funds, up $1.5 billion from last week. Much of that is institutional money that's not going anywhere. But if a fraction moves back to stocks, it could be electric. Oil prices. Light sweet crude oil spiked to $32 a barrel Jan. 19. It's down to about $27 a barrel now. Lower oil prices mean big savings for consumers and businesses. Taxes. Most taxpayers will have their 2001 tax rebate soon — as much as $600 per household. All told, that's $40 billion that's moving from the government to consumers — and, the government hopes, to the malls. Papp points out that earnings comparisons will be getting easier, too. Many companies posted record earnings in the first quarter of 2000, so anything less than spectacular earnings in the first quarter 2001 looked disappointing. And on Wall Street, an earnings disappointment usually means a swift trip to the basement. But many companies started reporting lower earnings in the second quarter of 2000. Beating earnings from 12 months ago will get progressively easier for many companies — which should make their earnings gains look better. Peter Lynch, former manager of Fidelity Magellan, points out that even though the stock market has performed dismally, housing prices have climbed. For example, the stock market has lost about $4.4 trillion the past 12 months. But home prices are growing at about 5.5% annually, estimates real estate tracker DataQuick Information Systems of LaJolla, Calif. Appreciating homes are adding about $55 billion in value every month. And, says Lynch, things were much worse in the recession of 1990. "Banks were in awful shape; state and local governments were in horrible shape," Lynch says. Most of all, you have to keep the slowdown in perspective. Recessions typically last 12 to 18 months, and recoveries last 4 to 8 years, he says. "You're better off betting on the recovery." KJC