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To: Jay8088 who wrote (2457)	9/3/1998 3:32:00 PM
From: growthvalue	Read Replies (1) \| Respond to of 3424

I think the suggestion was that stocks do not have a causal effect on the economy (which isn't entirely true - strong equity markets lead to consumer confidence leads to consumer spending), but rather that the economy has an effect on stocks. Although you are correct that stocks anticipate the economy, except for the influence I mentioned, it doesn't cause the economy to behave in a certain way. It is the outlook for the economy that influences stock fluctuations (in addition to individual business performance which is itself affected by the economy). And the outlook for the economy is derived from how the economy is actually performing. So in the end, I'd say the headline is sorta correct. Stocks are really an indicator of how the economy is expected to do. As a result they are lead by the economy to the extent thatwhen there are surprises in the economy that differ from the consensus outlook, stocks are affected. To put it more simply, the value of stocks is dependent on economic variables, or the anticipation of those variables. Economic variables, on the other hand, are largely independent of stock values.

To: Jay8088 who wrote (2457)	9/3/1998 3:42:00 PM
From: MulhollandDrive	Read Replies (2) \| Respond to of 3424

J, Zweig's opinion is interesting to me and I think has some validity, however, the majority of the stocks on the Nasdaq for example are already down on average 40%! The breadth of the market advance since the October 97 break has been absolutely awful. The soldiers have already been shot and now the generals are in the crosshairs. So I guess I would argue that the top tier selloff is key. I thought I heard a report that yesterday only the small cap index was up. The CRB index is at a 21 year low.....What happens to the yield curve if the Fed lowers rates? I think the weakest part of his argument relates to the historical p/e level. At the risk of making a "this time it's different" argument, I would point out that never in history has there been the broad participation in equities by individual investors as we have today. You could argue that p/e's are necessarily higher by virtue of a supply/demand dynamic. More and more investors are chasing fewer stocks. Now obviously investors do not have to put their money in equities, they can go to low-risk fixed instruments, but I think most investors are convinced that they will need capital appreciation to fund their retirements. Historically that is best accomplished in the stock market. bp