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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (54827)	4/6/1999 3:48:00 PM
From: sjemmeri	Read Replies (1) \| Respond to of 132070

>So far, the intellectual reasoning behind the rise in stock pe ratios has been two-fold: 1. Growing eps. Last year eps were down and the market hit record levels, so that has proven to be a scam. < I'm not defending the rise in PE but hasn't most of the recent PE expansion been in those stocks that have continued to grow earnings?

To: Knighty Tin who wrote (54827)	4/6/1999 3:49:00 PM
From: Michael Bakunin	Respond to of 132070

I agree, but would remind you of the only reasonable argument I've heard for higher PE's: that investors, for whatever reason, are accepting lower expected returns in return for the risk of holding equities. If so, it's possible PE's could remain elevated. However, I conclude that there is no evidence for this view, and lots of evidence that the aggregate of investors now think stocks will always rise 25% or more per year. In the latter case, there's no place for PE's to go in the long run but down... so, what's keeping them? <grumble> -mb

To: Knighty Tin who wrote (54827)	4/6/1999 3:52:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Mike, >Does the Fed want to continue to accomodate the market mania? Of course.<< I fail to see why the Fed would want to do this assuming they have anyone's interest at heart besides their own reputations and a few Washington politicians. Oops. I answered my own question. <g> WC

To: Knighty Tin who wrote (54827)	4/6/1999 4:04:00 PM
From: valueminded	Read Replies (1) \| Respond to of 132070

Mike: As long as the government can fool everyone into thinking that long term bonds are a great buy now cause interest rates are heading lower, they can keep this up as long as they want. (look at the long end of the treasuries today) So, companies borrow to buy back shares, FED cuts short term interest rates to allow easy money, shareholders pull money out of the market and go into debt to support the buying spree. Treasury collects record tax revenues fueled by stock market capital gains. Everybody wins <g> Now eventually, you would think we would hit a debt ceiling but as long as we can convince everyone to buy our debt whilst expanding the money supply we should be able to continue. On a side note, it is a good thing we can ignore (and convince bondholders to ignore) the volatile component of the CPI this month as gasoline prices have rocketed 20% within the past 6 weeks.