RE: [CANSLIM] OT 7

From: "Mike Gibbons" <mike@proactech.com>
Subject: RE: [CANSLIM] OT 7
Date: Tue, 29 Oct 2002 12:33:48 -1000

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Hi Rich,

Yes, I agree with you that managing the stock market is not explicitly
within the terms of reference of the Fed, unless one extends the meaning of
"stable prices" to include "stable stock prices", which I think would be a
stretch. To bash Greenspan for failing to manage what he is not mandated to
do is just silly. However, it is fair to say that he should have forseen the
longer term effects that "irrational exuberance" would have on output and
employment in the longer term and taken whatever measures he could have to
constrain the exuberance. I understand that one simple option would have
been to increase constraints on margin borrowing which was within his power.
Whether or not this would have had a significant effect is debatable
however. It seems to me that we should look to the failure of other
institutions, such as the SEC and the congress that failed to support the
reforms that Arthur Levitt wanted to introduce, and the accounting industry
that permitted outright lying in financial statements to fuel expectations.

But ultimately, the fault lies with us. We get the government (and
oversight) we vote for, and if we are foolish enough to buy a stock at 500
times earnings, because we believe in the greater fool theory, then we only
have ourselves to blame when the bubble bursts. (No one in this group of
course).

As for the critique that the money supply spigot was opened too wide, then
if so, surely we would have seen more general inflation than we have seen?
Inflation has been mainly confined to specific areas of the economy, such as
housing (recently due to low interest rates) and medical care.

"Maestro" explains how Greenspan convinced Clinton that the most important
thing he could do for the economy was to eliminate the deficit and I think
we saw the benefits of that policy in the late '90's. IMHO, an announced
return to that objective would have a significant effect on investor and
consumer confidence.

Aloha,

Mike Gibbons
Proactive Technologies, LLC
http://www.proactech.com


- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Rich Mau
Sent: Tuesday, October 29, 2002 9:45 AM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] OT 7


There seems to be a general belief that Greenspan's ( and the Federal
Reserve's) job is to manage the growth rate of the stock market. This is not
the case.  I do not doubt that what they do affect the market, but that is
not what they are supposed to be working on.

The actual job of the Federal Reserve is:

"to promote "maximum" output and employment and to promote "stable" prices."

Now, whether they have done this well is a question for discussion.

more at:

http://www.frbsf.org/publications/federalreserve/monetary/goals.html

> -----Original Message-----
.  .  .
> Rather than bashing Mr. Greenspan, we investors/traders need to
> examine what happened in the late 90s stock market run up .  .  .


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