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

To: AC Flyer who wrote (51485)	7/10/2004 11:11:13 PM
From: Taikun	Read Replies (1) \| Respond to of 74559

<1. The 2000 tech wreck was not the beginning of a multi-year secular bear market but was the beginning of a serious mid-cycle correction - the cycle in question being the 20 year introduction and rollout (1990-2010) of a slew of related wireless and broadband technologies.> It is not obvious to me that the rollout of new technologies will have greater impacts on productivity going forward than has already been made, and I believe these will rather be incremental. In the attached table the avg bull mkt is 14yrs, the longest 1929-49 coincided with WWII. Claiming a 20yr bull mkt is a bit aggressive now, when the conditions then (controlled war spending, 1944 end of gold standard) are not in place now. gold-eagle.com <2. The experience of the last three years has been a normal cyclical recovery from a mild recession, but with the twin overlays of the China factor and high productivity reducing economic growth and restraining job creation. The pessimists have focused on job losses and have ignored good GDP and personal income growth.> GDP growth has been due to superficially low interest rates, as is now showing up in a. lower hiring plans, b. profit concerns,c. lower CAPEX spending, d. FDI balance tipped to China money.cnn.com <3. While the media are full of stories of Uncle Joe's Investment Casting Emporium being driven out of business by Chinese competition, they have totally ignored the corollary story that many US businesses are benefiting from reduced material and component costs. Globalization is good.> I don't quite follow this as everyone from homebuilders to oil drillers is now passing on higher materials costs to consumers. builderonline.com As far as globalization being 'good'. Good for whom? All materials costs, from gasoline for farmers in the US to energy in China and India will increase. Ditto most commodities. The strive to engage in an outright increase of global living standards will put pressure on limited resources. <4. The capital spending cycle is turning, with capital spending now increasing from its post-2000 lows.> The cause-effect relationship is inverse. Low interest rates cause increases in CAPEX, increasing interest rates mitigate CAPEX. dbsam.com <5. Job creation is accelerating. More people working means higher consumer demand.> Not according to Challenger, Gray, ad Christmas money.cnn.com <6. Interest rates are low and will remain low. The discount rate remained at post-WWII lows for more than three years. The Fed will move the discount rate up slowly and cautiously.> Even Bill Gross and Warren Buffett can't guess what the Fed will do. Up a bit, down a bit more, then up a lot perhaps? Who knows? Don't try to guess the market, ditto the Fed, as they have to respond to the market. <7. S&P500 earnings are at all-time highs and corporate earnings continue to grow strongly.> They have come off a low base in 2003 when much was put on hold due to Iraq, moeover these earnings were caused by a low-interest rate environment that has already begun to change. pimco.com <8. US companies are sitting on an unprecedented pile of cash, accumulated from record high operating cash flows and from restrained capital spending.> Wouldn't have happened without these rates. <9. At current interest rates, stocks are significantly undervalued, as many people remain skeptical regarding the future prospects for equities. This is a matter of historical fact but nevertheless I am confident that many on BB&R will refuse to contemplate this possibility.> Which current rates? The Fed only controls the short end of the yield curve. When the foreign central banks didn't show up to lastweek's T-Bill auction, the 30yr yield shot up. 60% participation became 30%. <10. The boomers are desperate for one more score before they retire. As soon as they realize it's safe to go back in the water, there will be countless billions moving from money market funds to stocks.> The boomers are reverse-mortgaging their house to pay for healthcare and energy costs. Gasoline up 30% y-o-y, hospital care up 6% y-o-y, Tuition and childcare up 7.4% y-o-y Do your research here: bls.gov