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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (21388)	7/21/2004 1:03:28 PM
From: Bill Harmond	Respond to of 57684

I find this take by Byron Wein interesting: Perhaps what the stock market needs in order to get beyond the current period of weakness is to convert the remaining complacency into fear, as is often the case. Money managers collectively are experiencing performance anxiety: With the market's relatively flat results so far this year, there are not a lot of performance points to sacrifice before they end up in negative territory, following two years of unsatisfactory performance. If we test the lows for the year, most managers will be down for the year. The only way to get out of this bind may be for a very weak market in the near term followed by a stronger second half. There are several factors that may help move the market lower: The selection of John Edwards as Kerry's running mate should increase the chance of a Democratic victory; and the economic outlook for 2005 now looks less rosy than it did a few weeks ago. So there are background reasons for the market to be weak here. However, this does not change my optimistic view for the second half, and I view near-term weakness as a potential buying opportunity. A significant risk facing the market is that the money at the margin is hedge fund money, and these funds are basically living on their management fees alone. So there is performance desperation on the buy side. My impression is that most hedge fund managers lack ideas that inspire them, and the market isn't helping. I hear talk of taking the summer off and coming back to the market in the fall, but that will only be effective if we have a poor summer that sets the market up for a better fall. morganstanley.com