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

To: MrGreenJeans who wrote (25414)	10/16/1998 11:02:00 PM
From: Big Bucks	Read Replies (1) \| Respond to of 70976

MrGreenjeans, RELow inflation + Low interest rates + Slow Growth + A Decrease in Rates + Decent profit growth in 1999 = A sustainable upside We have the "Is the glass half full/half empty?" scenario here. The US consumers cannot sustain the growth of international US mega- corporations by themselves. Clark was pretty close in his previous post relating to the "overcapacity" situation. The US has become extremely efficient at producing vast quantities of products for the world wide consumer markets which is why we have been so profitable as a nation/ecomomy over the last 5-6 years. This is a "double edged sword" in that consumption must exceed production in order to continue the growth cycle. Once production capability overcomes consumer demand the value of products decrease (deflation). Once profit margins decrease, one of 3 scenarios develops: 1. Production must be cut back which negatively impacts profitability, jobs and corporate growth until the demand increases again. 2. Exports must increase to foreign markets/consumers to sustain output and growth by virtue of a larger consumer market. 3. Companies go out of business or merge with competitors, ultimately resulting in personnel layoffs and streamlining of business operations. (ever observed what happens when companies merge?) Case 1 is the current scenario, IMO. Case 2, cannot currently happen due to currency deflation issues overseas with our trading partners. Case 3, will be the next "wave" of the current economic situation, which is just starting to develop in the US economy, this must happen before the economy fully rebounds, IMO. It has happened during every recession, where the stronger companies absorb the weaker companies and modify their business model and streamline their manufacturing efficiencies which prepares them for the next boom cycle. Just my opinion, BB

To: MrGreenJeans who wrote (25414)	10/18/1998 6:35:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

MrGreenJeans: re: "Low inflation + Low interest rates + Slow Growth + A Decrease in Rates + Decent profit growth in 1999 = A sustainable upside" IMO, all the requirements for the continuation of the goldilocks scenario are going to happen, except the "Decent profit growth in 1999" part. Let's be specific about this: A: what is the profit growth in 1999 that would be required to have an increase in the market's PE? B: what will profit growth be in 1999? My guess is that A=10-15%, and B=0-5%. I think the odds of B=or>A are quite small. So, you don't get the sustainable upside. Instead, you get a volatile market going sideways, at best.