To: HeyRainier who wrote (794 ) 4/26/1998 1:13:00 PM From: Robert Graham Respond to
Very interesting indeed equating the availability of credit to what we have been seeing in the inflating financial markets. Also I agree that if the Fed were to provide for a stable market, the stock market would continue its course. Look at how there have been earnings and revenue reductions on many of the S&P 500 companies which takes an overvalued market and sets the reference for value even lower making this market more overvalued than it was before. What did the market do? It continued up. I guess the thinking here is that as long as the economy is doing well, there must be companies out there making good money. However, I see the public returning to the techs that was the very visible group that have been reporting slower growth. I think the public is really being driven by future profit expectations of the stock market kind, and the "rational" is added to this after the fact on how this somehow correlates to corporate profits. They supply themselves with the excuse to do what is familiar to them: ride those same tech stocks up for another profit. So P/Es and PEGs will continue to move up. Leave it to human nature to do the familiar, even when the situation has changed and the familiar may not work anymore. As long as the economy is "stable" and "in control" with continued prospects "sometime in the future" is the only rational needed for today's investor, which is much more tenuously connected to corporate profits. As I stated before, the liquidity from fund money is not helping the publics perception of the market.
