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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (772)	9/14/1998 11:07:00 PM
From: Berney	Respond to of 1722

Wayne, RE: Stock Prices and Interest Rates Let me get back to you. My plate is a little full right now. Berney

To: Freedom Fighter who wrote (772)	9/15/1998 12:44:00 PM
From: P. Ramamoorthy	Read Replies (1) \| Respond to of 1722

Wayne - Re.: Stock Prices and Interest Rates?? I'm interested in this discussion. I do not have data to back up my thoughts. Here we go: interest rate effect depends upon inflation, whether inflation is rising or stays steady. Interest rate affects the cost of capital available for expanding the enterprise (plant investments, production, etc.) and stimulating consumer demand for goods and services (mortgage, housing, equipment, travel, etc.) If the prices are not increasing (constant consumer price index and wages) companies need to squeeze earnings from internal productivity improvements, joint-ventures, marketing alliances, etc. (current situation). During the period of low inflation rate, the inflation-adjusted income (dividends+capital gain) stocks offer a better return on investment and therefore equities are worth higher p/e's. During the period of high inflation, there is no constraints on price, wages, etc. Brazil increased the interest rate to 40-50%, Mexico offers 40%. (Aside - Balance of payments affect local economy, currency valuation or devaluation, and global economy.) Ram