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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: John F. Dowd who wrote (9910)	8/1/1998 10:40:00 PM
From: ed	Respond to of 74651

Well Greenspan likes to talk down the stock market, why ? 1) To reduce the inflation pressure of the market. As you know our market is a closed system, every day, the sell and buy of stocks or merchandise did not reduce or increase the total money available within the system, just money change from hands to hands. As Greenspan talked down the market, more and more long term investors (those folks sleep with their stocks and never sell their stocks untill the last day ) gt frightn and want to sell their holdings, and this creat a sell pressure and knock down the stock price and more activities of money change from hands to hands, and this means more tax to the government, and which is the only way to take money out of the closed system, which is the market. As money available in the market is reduced, then the inflation pressure of the market is reduced, i.e less money running for more merchandise or stocks. However, those stocks , i.e MSFT, CSCO, LU, GE, with quality will always be the target for every investors to run after, so the price of those stocks will never drop !!! 2) Greenspan knows that the stock market will continue to grow , thinking about the US , and the world economy and the Asian financial crisis ! So, he wants to put a small break on it so that the government can cash out some of its tax money from the system. Why the market will continue to grow ? Well, the stock market is driven by money, the current Financial crisis in Asia will make those wealthy folks in Asia to move their wealth to the US stock market , which will furthr push up the stock price.The boom in the job market in US will continue move money to the market through 401K plan. With more and more money in the market running for stock with quality, like MSFT, the investors will accept higher PE in the futur. The PE is just a concept, the rule of the market did not say PE of 30 is acceptable or PE of 200 is not acceptable, just a matter of how much capitals is running after the limitted quantity of shares. Just look at those internet stocks, lot of them are still in the red and stocks climbed to the ceiling!! The secret is , there are too much money in the market. So, those internet stocks with infinite PE , the stock price still climb to the sky. To some extent, the Asian crisis is very positive to the US stock market. Why the flood of money will not push the price of merchandise higher ? The inflation is decided by supply and demand, the more demand and less supply will push up the price. However, more money in the market did not mean more demands for merchandise. The demand basically is correlated to the growth of population. If I already had one car, I do not need another car no matter how much money I had. I need only one car for transportation purpose. So, money in the market did not necessary translate to demand, or inflation. But flood of money in the market definitely means highr stock price and higher living standard . What I see the current trend is a beginning for the big wave of consistent growth in the stock market. When Asia back on track in the second half of 1998 or 1999, the world economy will get better and better.