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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 (21620)	8/3/2004 3:53:37 PM
From: Gerald R. Lampton	Respond to of 57684

>>nope. No more than your typical "hot company in a bear market" kind of hype. The sort of thing that made apple hot 25 years ago, but not enough to heat up a bad economy. . . . this economy seems like we are going back down. Oh joy << I don't know if you are into reading Bill Gross, but I find what he has to say about the economy fascinating, and the price (free) certainly can't be beat. Bill Gross has been ruminating for some time about the "high wire" economy "walking the wire between ice (deflation) and fire (inflation)" as a result of excessive monetary stimulus (inflationary trend) in an environment of excessive debt, or "leverage" as Bill likes to call it (deflationary). Perhaps this provides a partial explanation of why you can have a Google going out at $36 billion and houses at sky-high prices at the same time that the economy is, as you characterize it, "crappy." (Though perhaps I do not think it is as crappy as you do.) In his August commentary ( pimco.com ), Bill does a long piece on why he does not like hedge funds. I won't bore you with that, but the closing paragraph is of more general interest: "On a broader perspective, the growing fascination with hedge funds and indeed the ability to lever almost any asset at minimal borrowing costs which was the heretofore province of strongly regulated banks, promises excessive speculation that inevitably will follow the financial metronome's pendulum towards greed then back to fear, producing a number of near certain bubble poppings in the process. America's and, therefore increasingly, the world's economy is unstably founded on a base of cheap money used as leverage to support certain asset prices of dubious value. If and when the cost of those funds moves sharply higher for any reason - a dollar crisis, inflation, foreign central bank sales of Treasuries, increasing budget deficits, to name a few - then the flaws of a levered economy will be quickly exposed. It is then that many hedge fund managers will wish they had stuck to selling lemons, instead of lemonade and that they could return to their staid old jobs centered around active money management."