Table On-Topic Summary - 19-Oct-2002
A compilation of this board's financial/economic posts From 43835 to 43864

Post  43835  by  lkorrow       Reply
Decomposed, I wish I played. :-)

Post  43836  by  pmcw       OT: Decomp,
Post  43837  by  Decomposed       ot: Linda,

Post  43838  by  lkorrow       Reply
Incredible show, called "Understanding" [Iraq] on the Discovery channel, explaining handling of the first Gulf War. I'm just catching the end, but it sounds like it's worth seeing on a rerun . . .

Congress really got on my nerves today. What a group of bandits or bozos, whichever you prefer. Are they out of their minds or what? Here we are on the possible verge of another disaster and they tried their best to give the director of the CIA only ten minutes to speak. Ten minutes! Meanwhile, there's no homeland security bill. What's the matter with them? Don't they care? When will they pull their heads out of the sand? We ought to give them all camels and ship them to the Middle East for a personal tour of Iraq. Without escorts. How about we try them all for treason if al queda hits us again. I'm an irate customer, I mean voter. eom. I'm turning in. 'Night all.

Post  43839  by  lkorrow       OT: Decomposed, While it sounds like fun, I know w
Post  43840  by  lkorrow       OT: p. s. good thing an election's coming up!
Post  43841  by  oldCADuser       OT: Well I made it to India in one piece. Everyon
Post  43842  by  oldCADuser       OT: Quote of the day:
Post  43843  by  clo       OT: Oh Linda!& Decomp, VSE:

Post  43844  by  clo       Reply
GWB wants to cut back 27% on budget for SEC.
This is a 2 page article & on the front page of the NY Times.

Talk about playing into the democrats hands...
What a "gift" just before elections.
I was wondering how the democrats could get some momentum, and as usual, lately they get to play off the republicans... clo

Bush Seeks to Cut Back on Raise for S.E.C.'s Corporate Cleanup


WASHINGTON, Oct. 18 Less than three months ago, President Bush signed with great fanfare sweeping corporate antifraud legislation that called for a huge increase in the budget of the Securities and Exchange Commission to police corporate America and clean up Wall Street.

Now the White House is backing off the budget provision and urging Congress to provide the agency with 27 percent less money than the new law authorized.

Post  43845  by  lkorrow       OT: I don't know, Clo, I'm really enjoying the ent

Post  43846  by  lkorrow       Reply
Check this out!

Fed Mood Seems to Be Shifting Against a Rate Cut

ASHINGTON, Oct. 18 The Federal Reserve, which flooded the economy with money by sharply lowering interest rates last year as growth collapsed, appears much more unwilling to fend off another potential tailspin today.

In the last few days, a host of senior Fed officials have made clear that they think the economy is more robust than it appears to most Americans.

Industrial production may be down; job growth may be almost nonexistent; and corporations may be too nervous to invest in new factories and equipment. But at least for the moment, the message out of the Fed seems to be that the anxiety is overdone and that there is no compelling need to juice up the economy by reducing interest rates yet again.

"If we could all just settle down both the public and the private sector and try to get the uncertainty level diminished, the markets will take care of themselves," William McDonough, president of the New York Federal Reserve Bank and the most important of the 12 regional bank presidents who help set monetary policy, said at a conference in Manhattan on Thursday.

Jack Guynn, president of the Federal Reserve Bank of Atlanta, declared earlier this week that lower interest rates have "nothing at all" to do with the readiness of companies to start investing in new factories and adding more workers.

And other members of the Federal Reserve's monetary policy committee have echoed the view that the economic recovery, while still fragile, is nonetheless clearly under way.

"I think the probability of a so-called double-dip recession is relatively low," Gary Stern, president of the Federal Reserve Bank of Minneapolis, said in a speech on Tuesday.

The tone of those remarks contrasts strongly with the impression left after the most recent meeting of the Federal Open Market Committee, on Sept. 24.

At that meeting, 2 of the 12 voting members publicly dissented from the majority and argued that the weak economy was in need of a lift in the form of even lower interest rates. In a nod to pessimists, the Federal Reserve also took heed of the "considerable uncertainty" and said the risks were "weighted mainly to the conditions that may produce economic weakness."

Many analysts say the meeting hinted at a deep disagreement within the Federal Reserve. But a growing number say the debate is not just between those who want easier money and those who do not.

The board may also have another camp, whose members want to take a firmer line, actually discouraging hints that a rate cut is likely if conditions deteriorate much more.

Rarely have analysts and investors been as divided and uncertain as they are now about the prospects for the economy.

Most analysts and government officials say the economy grew rapidly in the quarter that ended Sept. 30, perhaps at an annual rate of 4 percent. The growth was powered by low interest rates. Homeowners refinanced their mortgages at lower rates, often taking out home equity loans to buy cars and furniture. Construction of new homes surged, as did the housing prices in general.

But most analysts say they believe that growth will be slower in the last quarter of this year, because both corporations and consumers have become more nervous.

William C. Dudley, chief United States economist at Goldman, Sachs, argues that the economy is far weaker than most people expected a few months ago and that the Fed must cut rates.

Mr. Dudley, who predicted in early August that the Fed would cut rates in the near future, says he is staying with his prediction. "I would say the economy since then has evolved more closely to our view of the world," he said.

Janet Yellen, professor of economics at the University of California at Berkeley and a former adviser to President Bill Clinton, said deep uncertainty provides a good case for cutting rates. "The decline in the stock market and the impact of corporate accounting scandals is taking a huge toll on the economy," she said. "Some people say the Fed should save its ammunition for later. I think that is completely erroneous."

Other analysts argue that the economy is in much better shape than the mood of corporate executives would suggest. Just as the Federal Reserve was early in supplying money when things began to look bad, it is now early to recognize that conditions are getting better.

"There is good reason to think that the stage is set for the most unbelievable performance," said James Glassman, economist at J. P. Morgan. By not acting, he said, the Fed will look as if it had the courage to sit tight when everybody else was panicking.

But the most important decision maker is Alan Greenspan, the chairman of the Federal Reserve Board, and he has been conspicuously silent since the meeting last month.

Post  43847  by  lkorrow       Reply
Clo, Decomposed, well I registered. One step closer! :-)

Post  43848  by  Decomposed       OT: Table ON TOPIC SUMMARY Oct 18, 2002

Post  43849  by  jeffbas       Reply
uponroof, I decided to put my time where my mouth was. I went through every Dow stock, one by one, to determine the downside risk in a further market calamity, but short of a world-wide economic collapse. Here is my summary, including the all-important environmental parameters.

10 year Treasuries - 3.0%
Inflation rate - less than or equal to 0%
DJII - 4,500-5,000
Median DJII Dividend yield - 3.5%

By the way, I put JPM at zero although I think that in fact the Fed would engineer an assisted takeover by someone else above that level. Also, even in a worldwide economic disaster, there are easily 10 Dow stocks that by virtue of stable, non-cyclical businesses and/or yield (like MRK) would prevent the DJII from getting even remotely close to 1,000.

As I said, I have nothing but contempt for writers who put out unsupportable forecasts of DJII 1,000 to sell more newsletters/books.

Post  43850  by  Decomposed       ot: Lkorrow, VSE
Post  43851  by  pacemakernj       OT: Dan that was a terrific article. Might be the

Post  43852  by  lkorrow       Reply
Decomposed, I think I'll put my $500K in the money market, then when I get past some hurdles on my web site and floor waxing, I'll jump in and see what I can do. Does sound like FUN! Just so you know, I wasn't worried about not winning, just being a total embarassement. :-)

Post  43853  by  pacemakernj       Reply
Linda, if the Fed does not cut rates, imo gold drops the markets really shoot up. Could happen given that earnings have been better so far than most people thought. Friday's action was very good given that we dropped about 120 points only to recover very quickly. That means institutions are putting money to work. I said the other day that we could be back to a "buy the dips" scenario. If the Fed is sending these kinds of signals now all I can say is we'll rally another 10-15% from here. Another factor did you see the action in the bond market this week. Major selling with the 10 year back over 4%. The dollar will strengthen bonds will sell off and the stock market will fly. The markets action this week could be sending such a signal. Given this news and your post on gold I may reduce my gold allocation this week. I also bought UTX, DUK, INTC which I sold I may buy back as well. I am thinking if we get a pull back to 8000 could be a good time to step up and buy. Just some thoughts. Pace.

Post  43854  by  lkorrow       OT: This stuff, Korea, etc., is really sobering.

Post  43855  by  lkorrow       Reply
Pace, wow what a summary! I may take my now-meager gains on AU and NEM, maybe I should take the loss on KRY too, not sure. Will think on it . . .

Post  43856  by  lkorrow       Reply
p. s. Decomposed, if you wever see that guy Chris Manning going out your way, you should consider his free seminar, since you're into what works. He has done over 10,000 hours of testing. The VSE site looks cool.

Post  43857  by  lkorrow       OT: Decomposed, Clo, I'm in!
Post  43858  by  wilful10       OT: Terror...
Post  43859  by  wilful10       OT: More - Why Do They Hate Us?

Post  43860  by  sunny786       Reply
Hi pmcw:

I am avid reader of your valuable posts.This morning I read this informative article and find most of the stock price in dangerously over priced bubble zone..Please express your opinion or comment.Thanks.

(Voluntary Disclosure: Position- No Position; ST Rating- Strong Sell; LT Rating- Strong Sell)

Post  43861  by  ttalknet2       OT: Chaostan - The Full Story

Post  43862  by  pmcw       Reply
Hi sunny, Thanks for the kind words. Since you mentioned that you've read my posts for a while you know I don't pull any punches when I comment about those who publish "qualified" reports about investing.

This report by Hamilton is far from the worst I've ever read, but it is essentially a several page advertisement that uses dubious data, false conclusions and hype. Sorry, but I immediately mistrust anyone who spends paragraphs setting up his story using religion and seeming cautious advice and then jumps to a totally false conclusion at the end as they try to close the sale.

Like most salespeople, Hamilton knows how to set himself up as the cautious, conservative and humble pundit. He's good at that. He also knows how to use some very realistic historic data as the basis for a case. However, I would like to focus on the false conclusion. At the end of the essay he says:

"If a prudent investor bought at the undervalued 6.6 P/E in July 1982 and sold at the super-bubble top P/E of 44.2 in December 1999, he or she would have reaped legendary 1322% gains! Where do I sign up?"

Throughout his essay he suggests that investors should look at buying around a market P:E of 14 (he goes through great pains as establishing that as the fair value point). He also makes a case for the market to see cycles down to PE: 7. Any fool knows that no reasonably smart investor piles all their money into the market on one given day. Therefore, one must assume that Hamilton promotes the erstwhile wise advice of investing during times when the P:E is at or below 14. For an index investor, this isn't bad advice - that is if they are calculating the P:E themselves because GAAP numbers are essentially BS.

Also in his essay, Hamilton makes the point that selling should be the rule when the P:E hits 21. Again, when there is a reasonable broad measure for index PE I think this is a reasonable suggestion. If not wholesale selling at least adjusting allocations to soften equity exposure.

Now, if we follow Hamilton's rules, we know that one would have never held off for P:E 6.6 as he suggested before investing a penny in the market. They would have been buying during the times when the index was less than 14. We also know that they certainly would not have held for the top of the bubble (you can't tell a top until it passes) to sell. Per his own directions, investors would have sold at P:E 21. It just so happens that this happened in about 1993 when the DOW was at roughly 3,750. In other words, if one were to follow Hamilton's course honestly, they would have started to invest around 1974 and then quit just before the 1987 crash, resumed for a few months and then quit totally by the turn of 1988. They would have then held for five years and sold in late 1993.

During this 20 year investment span, the average DOW cost would have been DOW ~ 1,400 and the sell would have been DOW 3,750. This means, not including dividends, the total return would have been 168% not the 1,322% he uses just before launching his close to sell his service.

Sorry sunny, this essay is just a little fact mixed with conservative innuendo that has been wrapped in huckster hype. Please don't take this to say that I'm of the opinion that the DOW, the S&P500 or the NASDAQ are under or over valued. If I were an index investor I would only look at the Wilshire 5000, but I'm not. I feel the same way I did in 1998 when I started investing full time. There are simply too many things wrong with the indexes for me to accept the wild card risks they impose on investors.

Regards, pmcw

Post  43863  by  kduff       Reply
L, Hey, I'm playing and I'm about as outclassed as there is in this group. Oh come on, I completely bombed on my strategy when the market continued to move higher.
It's just for fun,

Post  43864  by  lkorrow       Reply
kduff, ok, uncle, I'm in. Ypu're right. :-) It will be fun to experiment and I might learn something. Figured it wouldn't be such a good idea if I wasn't going to devote the time to it. Heh, I can drag out waxing the floors forever. :-) I still have to take a look at how everybody's doing. Have to read the rules too . . .