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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: 16yearcycle who wrote (25357)	10/15/1998 11:47:00 PM
From: Big Bucks	Read Replies (3) \| Respond to of 70976

Gene, Under normal world growth economic conditions I would agree with your contention that the markets should go up with the Fed easing. This time is probably the exception with deflation the norm and our trading partners furiously treading water to keep from going under. With a "no growth" or negative growth world environment, as is the current situation, it will take quite a while before foreign companies/consumers will be able to buy US products. Their immediate goal will be to "buy local" to improve their own economy and employment situation. Remember the 70's slogan "Buy American", I can see the same situation in Japan, Korea, Taiwan, etc. The idea is to keep the money at home, thus another reason for the increasing trade imbalance, plus the deflationary pressures of currency imbalances. Just my opinion, BB

To: 16yearcycle who wrote (25357)	10/16/1998 8:11:00 AM
From: MrGreenJeans	Respond to of 70976

Gene... Let me make it clear that I am less bullish than last Thursday's "time to get rich" situation, but someone here needs to tell the neophytes that the historical record of the market after 3 fed easings is one of enormous gains over the next year. I have just been waiting for someone else to say it since I hoped to not get out in front here again as I had to dodge a few tomatoes. Again, we have had a huge run for 1 week so hold the name calling if things flatten out, but getting in the way of an accomodative fed is historically suicidal. I would implore investors with a less than 5 year track record and less than 7 figures to stay away from any short positions of any significant size. Nice Post. It is laughable and yes suicidal that people would short the market in view of recent fed actions. When conditions change people's views need to change or they will not be market participants for long.

To: 16yearcycle who wrote (25357)	10/16/1998 11:49:00 AM
From: blake_paterson	Read Replies (1) \| Respond to of 70976

<<someone here needs to tell the neophytes that the historical record of the market after 3 fed easings is one of enormous gains over the next year. I have just been waiting for someone else to say it since I hoped to not get out in front here again as I had to dodge a few tomatoes. Again, we have had a huge run for 1 week so hold the name calling if things flatten out, but getting in the way of an accomodative fed is historically suicidal.>> Eugene: Hi there; I've enjoyed all of your posts and opinions. I guess I'm one of those neophytes, in for only three years and only at mid 6 figures, but nonetheless I feel comfortable with modest risks (they've produced 300% returns for me). My question / counterpoint: have not the all of past slowdowns (which have then resulted in fed easing) been the result of the fed having put an end to the party? Is not this time different, in that the market reigned in the overleverage by itself, causing the fed to react? I'm too ignorant to confidently speculate that this difference will create unique results this time, but my gut feels a LARGE downside risk still present in the market, up to 6 months out. Will they fix Brasil? Will market sentiment turn against the Japanese fix, rendering it another sham? Is memory overcapacity going to disappear on schedule? etc., etc. Amidst all of this, AMAT is approaching a forward PE of 40 today, and yet may announce a loss this Q (BEFORE restructuring adjustments, IMHO), and yet earnings revisions are not yet complete. All IMHO. Bets regards, BP

To: 16yearcycle who wrote (25357)	10/16/1998 2:30:00 PM
From: Clarksterh	Read Replies (2) \| Respond to of 70976

EK - Interest rates vs stock market: You are indeed correct that typically there is a strong correlation between lower interest rates and subsequent stock market growth (and vis versa). The primary mechanism is: 1) Economy overheats due to lack of capacity so Fed increases interest rates. 2) Several months later companies start to feel pinch as consumers buy less due to higher rates, and their debt payments increase. They start laying off, and earnings decline. Stock market declines accordingly. 3)Fed sees contraction and lowers interest rates. 4)Due to natural length of recession (time to work off inventory) and and due to lower rates (people start buying again and debt payments go down), company earnings go up. Stocks go up. However this scenario is completely screwed up since the economy is, atypically, being driven by over capacity not lack of capacity. It may not be possible to create enough demand via lower interest rates to soak up the excess capacity. Note that there is a secondary mechanism by which interest rates effect stock prices, but it is typically a much shorter cycle. As the interest rates go down, stocks or other investment vehicles look comparitively more attractive than they used to. Thus people become bigger buyers of stocks until they have a valuation consistent with the current interest rates. This mechanism is still in effect, but it typically equalizes out pretty quickly (+330 pts in 1/2 hour). I wouldn't count on it having any further effects over the next 6 months to 1 year. All JMO. Comments welcome. Clark