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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Math Junkie who wrote (7568)	9/2/1998 4:21:00 PM
From: Cynic 2005	Read Replies (1) \| Respond to of 42834

Richard, after posting that note, I have expected that somebody will pose that question. And you did. What I said is that I don't recall them verbatim but I DID hear Bob say to Pau kangas on NBR, and I did read them on this thread on a couple of occasions, including one posted some time last week. As I recall four of Bob's 5 factors are interest rates, low inflation, valuations, corporate profits 1. Low interest rates - bear markets DID happen while the interest were falling. Look at US in 1929 and Japan in late 80s and early 90s. Further lowering interest rates will not help as in an era of minimal or negligible pricing power, the profitless enterprise will only suffer more with additional capacity, which will definitely lead to deflation and very possible deflation - IF the feds lower interest rates immediately to ease the pain of some excessively bullish stock speculators. There are two interviews with two respected economists in this week's Barrons. Please read that to understand the phenomenon. 2. Low inflation - it is almost getting to a point where deflation is the major concern. The fact that there is any inflation is a surprise, given the amount of over capacity in almost all sectors. I believe this has to do with the excess consumption which can be linked to the wealth effect caused by the stock market bubble. There is an interesting article on this in today's WSJ front page. It is also a must read for all. 3. valuations - while Bob also contends that the valuations are high, he doesn't necessarily see that as a threat to the Bull. I do. Why extreme high valuations are a detriment at the peak of the economic cycle? The temptation to take money off the table is very high. Especially for the people who were holding the stocks for a long time. I do not buy the notion that liquidity due to fund flows will support higher valuation levels. In this market of high valuations, it takes sever thousand Richards' and Mohans' life savings to off-set the $2bil+ or so insider selling at Microsoft. 4. Corporate profits. I do not believe in the reported corporate profits, well at least most of them. Perhaps never in history such a level of deception exists in the reported levels of profits. Coca Cola ships syrup to Coca Cola Enterprises, in which KO owns 40% interest, to make its numbers. The funny thing is, all the debt is on CCE balance sheet. If you consolidate the results, a good chunk of the profits you have seen for KO over the last several years will evaporate. FYI, Informix has been caught with this kind of a scam. With the exception of Microsoft and possibly HWP, I think over 90% of the companies cook their books. One time charges are so common that they occur every quarter. Writeoffs for in process R&D have been abused to the maximum. What appals me is that a good majority of the investors are approving such practices. If you cook books, it is ok with me, but please don't get caught. I think when the market blows-up we will see more Cendents and Sunbeams. Got to go... More later -MMV