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.

Politics : Bill Clinton Scandal - SANITY CHECK -- Ignore unavailable to you. Want to Upgrade?

To: DMaA who wrote (15169)	11/18/1998 3:44:00 PM
From: Charles Hughes	Read Replies (2) \| Respond to of 67261

(OT, about the economy and investing climate:) From another thread, for comment if any: >>> As many on Wall Street say, "don't fight the FED, you'll lose." With another rate cut today, the general market should go a lot higher from here going into 1999 and IFMX will go along with it. <<< Normally I would whole-heartedly agree. That is the historical case. However: - The market is very high in P/E terms now historically. - World economic problems have not disappeared. - The market already recovered in a fabulous way after the first two rate cuts. You could argue that, anticipating the effect of the rate cuts as we now do, we have already discounted them into the future. Everyone has read Zweig, everyone has acted. - The market had a little pop yesterday on the announcement, today: nothing. I think it likely the Fed can prop up the market from here. But it would take 4% growth again to make the market steam. That normally would happen with these rate cuts, if extensive enough. However, we are going to be subsidizing the world economy now for a while (again) to avert disaster. And given that we all have all the stuff we could possibly need to buy already, and the middle-aged are trying to pay off their cards and prepare for retirement with little in the way of pensions, and we are starting to have some severe environmental restrictions on consumption, I don't know just how successful that will be. The world recovery would seem to depend on political reforms, an uncertain field of endeavor at best. Especially in the current political climate. So, this may be one of those exceptions. I wouldn't go short, but I'm not looking for any fabulous market gains from here, unless the Fed does something dramatic, like say .75% all at once. Even then, we might lose. Suppose that did not move the market? We would be like the Japanese, 1.5% rates and still pushing on a string. And it is catastrophic to lose the sense that there is a set of controls for the economy, as they are seeing in Asia. So that big drop in rates at this point might be better not done, as the three small drops have done the required job, raising market prices back to former levels, and it really does appear today that there is some 'pushing on a string' going on right now. Better gradualism? I don't know. but this is not a simple problem for the Fed to solve. Chaz