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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: kahunabear who wrote (540)	10/30/1998 11:01:00 PM
From: Shane M	Read Replies (1) \| Respond to of 4690

For those interested, RAL reported today. Positive earnings surprise. $0.33 vs an expectation of around $0.29. quicken.excite.com Shane

To: kahunabear who wrote (540)	11/6/1998 9:36:00 AM
From: jhg_in_kc	Read Replies (2) \| Respond to of 4690

Whipsaw here are 14 fundamentals for the bull (from the Dell thread): 14 Fundamental Reasons for a Higher Stock Market (from www.bull-market.com) Increased Savings The Baby Boomers are saving for their college education and their own retirement. 78 million people will turn 50 in the next 15 years. Comment: This will drive continued funds into equities. Corporate Earnings on the Rise Corporate earnings are good and will continue to improve. Comment: Major corporations have streamlined themselves over the past five years and are well positioned to profit handsomely in the future. However, the 3rd quarter of 1998 will be slower than expected. Inflation on the Decline There is low inflation; it will stay this way and move lower. Comment: The stock market thrives on low inflation. PE's May Grow PE's are only slightly higher than normal from a historic standpoint and have room to go higher. PE's for the S&P 500 historically have ranged from 17 to 23 and are currently at about the 20 level. There may be a reason for the higher PE's now - see the other reasons below. Comment: PE's have room to move upwards and are not out of line from a historical standpoint. Strong Economy The economy is strong and will stay this way. Business Week Magazine has a cover story about the 21st Century Economy. They state that the technological changes that will occur in the next ten years will dwarf what we have seen in the last ten, creating many opportunities for growth. They state: "We are just at the start of a powerul surge in technology that will boost economic gains into the next century." See businessweek.com Comment: This lays the groundwork for a healthy stock market. Coming Balanced Budget The budget has been balanced, and the political fallout will be very positive. Comment: This legislation has passed Congress and the ramifications of this will be felt over the next few years. Declining Interest Rate Trend Interest rates are trending lower. We believe they will head into the middle 4's sometime in late 1998 or early 1999. Historically, bonds trade about 300 basis points higher than the inflation rate, currently running between 1 and 1 1/4% per year. Inflation may drop further. Comment: The stock market thrives on lower interest rates. Investment & Equity Market Growth On average, $18 billion per month has been moving into the market for the last 36 months. However, August was a slow month, with only $11 billion and September was slower yet. We are watching this trend. This money must find a home. In addition, there are few alternatives for the investment dollar - there are fewer real estate investment choices, there are few oil and gas partnerships, virtually no tax shelters, and no precious metals investments like there were in the 1980s. Thus, money will continue to move into the equity markets, especially via 401k's. Comment: This trend will continue and will be a driving force for a rise in equity prices. Possible Investment of Social Security Funds Social Security is in serious trouble; it will be privatized sometime within the next 3-5 years. Part of that fix may be to invest some of those monies in equities. Greenspan mentioned this before Congress and there is various discussion now about allowing 2% of SS monies to be put into equities. This will be THE major political issue in 1999. Comment: Additional funds flowing into equities should produce higher equity prices. Stock Supply is Falling Continued major corporate stock buyouts are reducing the supply of stock, which increases the demand for the existing stock. Exxon, for example, has bought back 32% of its stock since 1983 and announced another buyback. Compaq announced a 100 million share buyback. Disney announced a 400 million share buyback. GM may buy up to 10% of its stock back each year for the next few years! Comment: Corporations are using their free cash flow to invest in their own stock rather than paying dividends, which are double taxed. These buyouts create strong pressure for upwards price moves. These are massive buybacks. Budget Deficit At the current level of economic growth it appears that the budget deficit will be brought to zero by early 1999, much faster than anticipated. Comment: Politically, this is powerful news. Increased fiscal responsibility from the US Government is a good trend and will be a further impetus for higher valuations for equities. IRA Investment Limit To Be Raised Congress has passed the Roth IRA law that provides investors with the ability to invest funds and allow them to grow tax-free. Comment: This will force more money to be moved into equities over the next decade. Lower Capital Gains Taxes Congress lowered capital gains taxes again in July, 1998. Comment: Historically, lower taxes have been good for equities The Internet The growth of the lnternet is giving investors from around the world quick and inexpensive access to markets and information. Trading activity and commerce are likely to increase rapidly as the internet further permeates our lives. Comment: The internet will continue to produce wealth for those individuals and corporations that are forward thinking.