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 : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (679)	6/23/1998 9:34:00 AM
From: Tommaso	Read Replies (1) \| Respond to of 3339

I can only see the self-reinforcing on the downside. Much stock and mutual fund investment is already being carried on credit. With the yen declining, that means a rise in the U.S. market of another 20% has already occurred in yen, for any Japanese investors who might have cared to move money into U.S. equities. I don't see that there's the money there to fund a buying panic. The mutual fund cash positions are already close to what they have to hold just to take care of routine transactions. I suppose the Fed can continue to allow the U.S. money supply to balloon, but with long-term yields almost equal to the federal funds rate, and with the federal funds rate at almost four times the average yield on stocks, there may be an easing of new money going into stocks. And very small withdrawals of money from the market can have very large effects. At the bottom of severe bear markets the opposite situation prevails; when deman for stocks finally reappears, small additions of funds can move the market up easily. But now the capitalization is so enormous that extra money adds only a small amount of extra demand. Or so i see it.