Re: [CANSLIM] OT 7

From: Eric Jaenike <ericjaenike@yahoo.com>
Subject: Re: [CANSLIM] OT 7
Date: Tue, 29 Oct 2002 11:56:58 -0800 (PST)
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I am less munificent about Greenspan's performance than you, I'm afraid. I agree that we need to spend time examining the runup in the late 90s, and to learn from it. Unfortunately, I believe Greenspan played a central role in that runup through a tremendously expansionary monetary policy. Those polices appear to be quite similar in effect to the expansionary policies practiced by the Fed in '24-'27.
There was a tremendous increase in the money supply in '97, '98, and '99 in response to SE Asia, Russia, and Y2K, at the very time the market should have been allowed to correct. This liquidity, IMHO, generated extreme malinvestment and the enthusiasm that accompanied that trend. Since 2000, we have seen a tremendous decrease in interest rates, and a loose monetary policy. I believe these policies have led to additional asset inflations, notably in housing, and a levering of corporate and, especially, consumer balance sheets. I also believe we have seen the end of that cycle, along with a peak in refinancing activity. Without those props creating artificial and temporary demand in the consumer sector, I think we will see a correction in the real economy. Of course, the links I included explain these ideas much better than I can here.
Perhaps I'm wrong. I certainly hope so, because if I'm not, things will get quite a bit worse before they get better. Given the trend in economic data, and, IMO, the quality of this current rally, which to me seems much more like an oversold bounce than a sustainable run, I suspect I am not.
And of course, as traders/investors, these ideas serve as background only. The true tells are all in the market itself.
Eric
 Robert Gammon <rgammon51@yahoo.com> wrote: What stock market investors think about Alan Greenspan in the 
short term is very nearly irrelevant to the long term effects of 
his stewardship and the opinions of the legions of people who 
don't focus their attention on the stock market. His attention 
is clearly on what matters in the proper function of his job, the 
economy. His goal seems clear, avoid exuberance on EITHER 
extreme. More so than most Fed Chairmen, he has managed this 
quite well. Granted, this is a cooperative effort, the Fed does 
not have all of the tools in its grasp to take total 
responsibility for what happens.

Rather than bashing Mr Greenspan, we investors/traders need to 
examine what happened in the late 90s stock market runup, and 
determine how to properly respond with our investing/trading 
strategies when thos conditions reappear. The time periods 
differ, but there are similar lessons to be learned in lots of 
markets, real estate for example. There is credible evidence 
today that suggests we may be near a peak for single family home 
construction.

Robert Gammon
Houston, TX


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<P>I am less&nbsp;munificent about Greenspan's performance than you, I'm afraid. I agree that we need to spend time examining the runup in the late 90s, and to learn from it. Unfortunately, I believe Greenspan played a central role in that runup through a tremendously expansionary monetary policy. Those polices appear to be quite similar in effect to the expansionary policies practiced by the Fed in '24-'27.
<P>There was a tremendous increase in the money supply in '97, '98, and '99 in response to SE Asia, Russia, and Y2K, at the very time the market should have been allowed to correct. This liquidity, IMHO, generated extreme malinvestment and the enthusiasm that accompanied that trend. Since 2000, we have seen a tremendous decrease in interest rates, and a loose monetary policy. I believe these policies have led to additional asset inflations, notably in housing, and a levering of corporate and, especially, consumer balance sheets. I also believe we have seen the end of that cycle, along with&nbsp;a peak in refinancing activity. Without those props creating artificial and temporary demand in the consumer sector, I think we will see a correction in the real economy. Of course, the links I included explain these ideas much better than I can here.
<P>Perhaps I'm wrong. I certainly hope so, because if I'm not, things will get quite a bit worse before they get better. Given the trend in economic data, and, IMO, the quality of this current rally, which to me seems much more like an oversold bounce than a sustainable run, I suspect I am not.
<P>And of course, as traders/investors, these ideas serve as background only. The true tells are all in the market itself.
<P>Eric
<P>&nbsp;<B><I>Robert Gammon &lt;rgammon51@yahoo.com&gt;</I></B> wrote: 
<BLOCKQUOTE style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #1010ff 2px solid">What stock market investors think about Alan Greenspan in the <BR>short term is very nearly irrelevant to the long term effects of <BR>his stewardship and the opinions of the legions of people who <BR>don't focus their attention on the stock market. His attention <BR>is clearly on what matters in the proper function of his job, the <BR>economy. His goal seems clear, avoid exuberance on EITHER <BR>extreme. More so than most Fed Chairmen, he has managed this <BR>quite well. Granted, this is a cooperative effort, the Fed does <BR>not have all of the tools in its grasp to take total <BR>responsibility for what happens.<BR><BR>Rather than bashing Mr Greenspan, we investors/traders need to <BR>examine what happened in the late 90s stock market runup, and <BR>determine how to properly respond with our investing/trading <BR>strategies when thos conditions reappear. The time periods <BR>differ, but there are similar lessons to be learned in lots of <BR>markets, real estate for example. There is credible evidence <BR>today that suggests we may be near a peak for single family home <BR>construction.<BR><BR>Robert Gammon<BR>Houston, TX<BR><BR><BR>-<BR>-To subscribe/unsubscribe, email "majordomo@xmission.com"<BR>-In the email body, write "subscribe canslim" or<BR>-"unsubscribe canslim". Do not use quotes in your email.</BLOCKQUOTE><p><br><hr size=1>Do you Yahoo!?<br>
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