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24 سبتمبر 2001
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168
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#1
Who Pays This Bill?
From tax rebates before September 11th to massive and increasing
government packages afterwards the tab is increasing to staggering
proportions. Our government has a blank checkbook and freedom to
spend under the guise of patriotism. Speaking from a neutral voice
on the stimulus package trying to clear the senate, I see a bill
packed full of upper-end corporate pork that is short-term good
for specific companies but little else. Lest one tries to impress
upon me the failed theory of trickle-down economics, we already
tried that one under Reagan's regime. Read my lips, taxes were
raised and the economy collapsed beneath the burden soon after.

Bye bye government surpluses, hello budget deficits. How does our
government handle budget deficits? Why it cuts spending, of
course! Wait a minute, I must have inhaled some second-hand smoke
there for a moment. Our government never cuts spending... that
would be too sensible. They raise taxes to cover the deficit
instead.

Let's assume the massive liquidity injection spurs this economy
into a V-shape recovery in 2002 like the raging bulls now bellow.
What does a heated economy do with sub-inflationary interest rates
to work with? It catches fire! What does that do to Greenspan &
Co? Puts them back on inflation watch as interest rates get
ratcheted back up once again. So the endless cycle of bumpy
landings continue.

But, E's Will Catch Up To P's
The latest mantra I hear is that next year's (?) economic recovery
will see corporate earnings outpace increasing stock prices to
rebalance PE ratios lower. Are you kidding me? Something stronger
than second hand smoke is inhaled by those who believe that
ludicrous fairy tale!

Can you honestly see companies announcing positive earnings while
buyers hold off on bidding shares to the moon? Just let the chips,
networkers or biotechs release honest-to-goodness strong earnings
right now and it will be 1999 all over again. PEs will not shrink:
they will balloon.

And therein lies the problem. We are destined to endure markets
that move sideways in one huge trading range for years and years
to come. It is predestined by Fed policy and natural cycles
markets repeat. Buy & hold investors may see their former high
flyers roll in a sideways range for ten to twenty years, but that
will be long after they fall from favor for good.
 
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