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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: MrGreenJeans who wrote (8874)	12/22/1998 12:58:00 AM
From: Diamond Jim	Read Replies (1) \| Respond to of 42834

Mr GreenJeans, I can't even begin to try to convince you or anyone else to get in at these levels, we do not expect a rate drop soon either. When I look at the market I see a NAZ that has blown away the old highs, a S & P 500 that's high, the Dow is not at its high but then Bob has been saying that for a couple weekends now. I am holding my long positions in the equities I own and sold my trading shares today. Sometimes I think of searching for some mid caps or small with low PE's and a good outlook but why??? look at where people go, names, names, names, they/we oversell then overbuy. I can tell you 1 thing Bob says is so true, I've traded way too much in '98 and I've spun my wheels, if I'd have held my positions I'd be just as far ahead. Thanks for the number crunching, it reaffirms what I was sensing. I think Greenspan used the phrase irrational exuberance a year too soon. Isn't it ironic that Bob spoke Sunday about the Ebays/Amazons and look at them go again today. It will be some show when they do begin to fall and I wonder if this could be the last hurrah before Christmas to hype internet sales. Isn't 70% a bit heavy for this level? In Oct I opened two Roth's (VTSMX@21.96), I am hoping for a little pullback to stick the remainder in them? So, what's the hard question? I don't think you missed anything in your analysis. I read a newspaper last weekend, business section was recommending 30% in equities, talking about 40% of the world being in a recession. jim

To: MrGreenJeans who wrote (8874)	12/23/1998 1:31:00 PM
From: Jim O'Hare	Read Replies (1) \| Respond to of 42834

I guess I was wondering why there should be an upper bound of 24.5 on P/E multiple expansion. My thinking is that the P/E multiple expansion is inversely proportional to interest rates. If a company's fair value is simply the present value of future earnings, and interest rates decline, the fair value (price) of that company should go up assuming earnings remain constant. The long-term trend of interest rates has been down since the early 80's. The cost of money is relatively high 3.5 to 4.0 % above inflation depending on how you gage inflation. Producer prices are going down. Much of the world is in depression. It would seem to me that long-term trend of interest rates remains down. As for the "federal reserve", although they still do have considerable power in adjusting the cost of money, I think they are quickly losing that control. If they set interest rates too high, financial institutions can borrow from other central banks or too low and foreign financial institutions will borrow from the fed. In short, errant federal reserve policy in the not to distant future will simply be subsidizing large financial institutions and providing "free money" to global financial speculators.