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

To: Alan Bell who wrote (7609)	9/4/1998 1:30:00 PM
From: MrGreenJeans	Respond to of 42834

Recession Not Even a Remote Possibility <<Why do you believe these recession fears aren't justified?>> 1. Most recessions are Federal Reserve induced. There is no chance Alan Greenspan and the FOMC are going to raise rates in the near future because of international concerns. If rates rise there are all sorts of ramifications one being a stronger US dollar and that complicates matters overseas. Again, absolutely no chance rates are rising. 2. The money supply has been growing at a healthy clip-another indication rates will not rise anytime soon. 3. Inflation is in check in part due to the Asian crisis and its effect on prices in this country. Imports are cheaper from Asia and that forces American competing companies to keep prices stable. One more reason rates will not rise. 4. The American economy may or may not be slowing down. The verdict is not in. I believe the Fed is still trying to decide whether or not the US economy is in a slowdown. Another reason rates will not rise. 5. The GDP has to have 2 negative quarters in a row for an official recession to occur as defined by NERA. GDP has been positive now for quite sometime. 6. Consumers have ample cash and wealth derived from a booming equity market correction or no correction. Seems to me like consumer spending is still healthy and looks to me like we will have a good holiday season. Just some of the reasons...perhaps more later...

To: Alan Bell who wrote (7609)	9/4/1998 1:41:00 PM
From: MrGreenJeans	Respond to of 42834

The Bear Mentality <<We have seen a number of big investors, and not just the usual bears, claim that we are entering a recession. The claim also is that by the time that the Fed recognizes this, it will be too late to lower rates (or alternatively because long bond rates are so low, lowering the fed rate won't stimulate much.)>> I belive the Federal Reserve will hold rates steady in here until they see inflation picking up or a true slowdown in the US economy or more crises from overseas. Many cries from people who wish to see rates come down are not based on a slowing economy or the aforementioned but rather based on falling equity prices. I believe they want to see the Fed cut rates so they can be made whole again. I do not think the Fed will act due to falling equity prices...I would be shocked if they did. In any event, the bond market seems to be taking care of lower rates anyway the 30 year bond rate as I write is somewhere in the neighborhood of 5.3%. Further, there are those bears whose mentality that I do not understand that always believe that doom is upon us and we are on the brink of recession. It is important to note that one should not be bearish or bullish but that one should be objective. Be objective, be rational, be true to yourself as an investor, evaluate the situation, and act accordingly be it by buying or selling.

To: Alan Bell who wrote (7609)	9/4/1998 8:25:00 PM
From: HammerHead	Respond to of 42834

Greenspan: <Moreover, it is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress. Developments overseas have contributed to holding down prices and aggregate demand in the United States in the face of strong domestic spending. As dislocations abroad mount, feeding back on our financial markets, restraint is likely to intensify> <The American economic stability of the past five years has helped engender increasing confidence of future stability. This, in turn, has dramatically upgraded the stock market's valuation of our economy's existing productive infrastructure, adding about $6 trillion of capital gains to household net worth from early 1995 through the second quarter of this year. While the vast majority of these gains augmented retirement and other savings programs, enough spilled over into consumer spending to significantly lower the proportion of household income that consumers, especially upper income consumers, believed it necessary to save. In addition, the longer the elevated level of stock prices was sustained, the more consumers likely viewed their capital gains as permanent increments to their net worth, and, hence, as spendable. The recent windfall financed not only higher personal consumption expenditures but home purchases as well. It is difficult to explain the recent record level of home sales without reference to earlier stock market gains.>