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To: Investor2 who wrote (2549)	12/21/1998 10:22:00 PM
From: MrGreenJeans	Read Replies (2) \| Respond to of 15132

I2 RE: "Why would one want to be 100% fully invested in this market when we are at 95.33% of possibly the upper range the S and P will see in 1999? ... I am currently 70% in equities-30% in cash and bonds." Each of us must answer that question based on individual circumstances. Several possible answers (not necessarily MY answer, mind you) include: 1. There is no other compelling investment vehicle. Why choose to accept 4 to 5% in a money market? The return from your example would be 4.67% capital gains plus 1.7% dividends = 6.4%. Four to five percent in a money market captures most of the 6.4% gain with little risk which at these levels at this point in time may be significant. 2. I don't want to sell and pay 20%+ of the profits to the government as capital gains tax? So what if the market moves sideways for a while? If I don't need the money now, why should I pay the tax now? I do not want to sell either although I may take more profits. Better to sell and take profits than to suffer through a severe correction. 3. Interest rates are falling and inflation is just about dead. Historically, the market has performed well in periods of falling interest rates and low inflation. I believe I have taken this into account when I assume a S and P 500 price earnings ratio of 23.5 to 24.5 times. That is why the multiple is so generous low inflation low rates. 4. The earnings could surprise on the upside. This could result in a higher price for a given P/E. It could also cause P/E multiple expansion. Always a possibility. At this point the Federal Reserve sees the economy slowing down otherwise rates would not have been cut 3 times in 7 weeks with perhaps more to come. Contrary to popular opinion, I think that an asset allocation of 70% equities:30% fixed is somewhat aggressive. If you feel uncomfortable, move to a lower equity percentage. Against my better judgement I will be reallocating to my more normal 95% equity 5% bond position in order to play the strength at the end of the year. Usually the last week and half of the year is strong and I am guessing money will be pouring into the market in early January. I will be momentum investing for these next couple of weeks hoping to catch more profits before moving back to my present position. I still believe at these levels 1999 is already being discounted as strange as that may sound.

To: Investor2 who wrote (2549)	12/21/1998 10:28:00 PM
From: MrGreenJeans	Respond to of 15132

Lex-Financial Times-December 22nd US ECONOMY: Respectable slowing How fast is the US economy slowing? Not too rapidly if you believe consensus forecasts by Wall Street economists, who expect gross domestic product growth of 2.3 per cent for 1999. That is a fair step down from this year's 3.7-3.8 per cent, but still close to trend growth of 2.5 per cent or so. The International Monetary Fund yesterday predicted a somewhat more bearish 1.8 per cent for 1999. Yet even this is respectable in a slowing world. Perhaps both guesses will turn out to be too optimistic, however. Most economic models assume the continuation of three linked phenomena - low levels of consumer saving, a widening current account deficit and a buoyant stock market - which are unsustainable in the long run. That does not mean they cannot work in tandem for another year. But there is also a risk that 1999 will see them reverse. Assume that consumer spending growth, which has already eased from over 6 per cent to 3.3 per cent, continues to slow as households save a touch more. That might provide some relief for the trade deficit, as demand for imports eases. But accompanying that would be a far more damaging fall in demand for domestic goods. That, in turn, would hit corporate earnings, threatening equities and jobs, and thus have a further impact on consumer confidence. Meanwhile, there is a separate worry that the banking industry contains further bad risk, àla Long-Term Capital Management. Certainly, bank loans to financial firms have soared to an all-time high. Investors appear convinced that a severe slowdown would rapidly be offset by further easing on the part of the Federal Reserve. But cutting interest rates to stabilise the financial system is very different from doing so to protect the stock market. Investors should not count on Alan Greenspan, the US Federal Reserve chairman, to bail them out.