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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Oeconomicus who wrote (17696)	3/16/1999 4:59:00 PM
From: michel ciambra	Respond to of 18691

Firstly let me explain my frustration and thus the reason for using sensationalism in this context. The press and media in general seem to thrive on bad financial news. No great prize for knowing why. Chaos sells space. But it is almost as if all those who have been calling for a market correction since Greenspans' infamous 'irrational exhuburance' speech will one day come back on tv and tell me 'i told you so'! The fact that the market has rallied through the roof since then is apparently irrelevant. Anyway, thats an aside. Let me show you a simplistic version of the world and why as edith piaf once said 'je vois la vie en rose'. Firstly US interest rates. Undoubtably the one factor on which all other revolve. You rightly point out that this will be the key to inflation going forward but i also see little commodity inflation in the next 4 quarters. ( a time period i am comfortable with). OPEC may well pull out some deal on supply on paper, but putting it into effect, monitoring its legislation has and always will prove impossible. The bottom line for third world oil producing countries is that they get as much as they can NOW. So, back to US rates. Asia is argueably coming out of the worst of its troubles but will have been left with an aggregate debt burden which over time will eat into corporate profits and budget deficits. Russia is in a state of turmoil that makes me believe that it cant possibly get any worse (and therefore worth a decent punt!) Europe is not sure how its going to stimulate growth without lowering rates....ciao Lafontaine. Latin America is in the midst of its own crisis, the worst of which is not even Brazil. The US budget surplus is projected well into the 21st century. The need for new issuance is going to be lower although not as little had they decided to pay back the national debt as opposed to financing the Social Security of a collective generation who were told to invest in Utilities! How on earth can the US raise rates even if they needed to. IT would devastate large tracts of the world economy that is already burdened by almost unpayable debt. Greenspan knows that will backfire and ultimately only import a demand driven recession here. Do they need to? THe economy is going full thunder and i agree has to slow down at some point. But where will the slowdown come? Certainly manufacturing is an obvious candidate. Will the slowdown come from the technology section? Probably some of it. But i concur with those who believe we are in a new economy. The rules have changed, the model is and will be different. Can corporate earnings be sustained at 30% to bring into line the average PE. NO. but they dont all need to. Let me explain. 1. more people now work in the computer hardware, software and services industries combined than in the auto, auto parts, steel, mining, and petroleum refining industries combined. This shift may explain why two thirds of all the growth in the economy is coming from telecommunications and technology; two sectors where prices are falling. Is that not growth without inflation. ?? Buy Yahoo now or live in eternal regret as must do the Luddites of the 18th century. 2. BY any standards, the internet(and afterall this is the point of the subject ultimately) is the most far reaching discontinuous innovation of all time. This alone is not enough to keep an economy going but consider the growth rates. Trafic doubles every 100 days! Cisco turned 100mm usd in 96. In 97 it turned 3.2 bn usd etc etc etc For me this is the key. We are in new territory. Do i care whether coke can earn 20% more a year to justify its price. Not likely. Iam simply positioning myself where the value is. INTERNET. YAHOO! is a leader in its field. IN the biggest discontinuos innovation of all time. In a benign interest rate environment! Sure there will be down days, but in 10 years time when the industry is worth 100 times what it is today, YAHOO! will still be there and ill be smiling. Be lucky. michel ps.. it takes 2 to make a market!