MSNBC article on Net IPOs: Fed's excessive liquidity the reason for the big bull market?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Here's a link to an article on MSNBC about Net IPOs.
In this article, the author makes the following argument to explain the recent drop in the stock market and what he believes will be the continuing slide of lots of 'Net stocks.
"Until recently investors havent been hurt really badly hurt, that is by ignoring those warnings, so there hasnt been much complaining from consumers and for that, Wall Street can thank the super-accommodative monetary policy of the Federal Reserve for letting the investment firms get away with what they did. Now, of course, it looks like the jig is up.
Between the spring of 1996, when internet IPO fever really began, and October of 1998 when it entered what now looks to have been the start of its final and climactic blowout phase, interest rates fell by nearly a third as the Federal Reserve pursued the most expansive monetary policy of the last 40 years.
Adjust the Feds monetary growth rate for inflation, and you will not find a single period in post-war American history not even during the inflation-cursed 1970s when the Fed was cranking out more money, over and above the demands of the economy, than between 1996 and the end of 1998.
It was that excess liquidity and nothing else that fueled the super-boom in the stock market, sending the Dow industrials upward in a double-your-money spiral in barely 30 months time, even as it brought underwriters rushing to market with an unending stampede of Internet dreck.
Now, the Fed has grown worried about the inflationary genie it may have let escape from the bottle, and since mid-summer Mr. Greenspan has cut monetary growth in half to not much more than the growth of consumer prices while nudging interest rates up by roughly a fifth.
The result has been nuclear meltdown in the land of the New Paradigm, as investors have suddenly and shockingly waked up to what should have been obvious to them all along: that in a world of rising interest rates and slowing economic growth, any company that cant generate its own growth capital from retained earnings is ultimately doomed."
-- Don (firstname.lastname@example.org), October 14, 1999
Oops. Hate it when I do that. Here's the link...
-- Don (email@example.com), October 14, 1999.
When MSNBC starts sounding like fiend's SuperBear
you know that the market does not have much life left.
And the Prez told us today that life was all roses and things would just get better in February. We can not keep a temp receptionist at work because the job market is so tight. Wait a few months.....
Things will get worse before they get better.
-- Helium (Heliumavid@yahoo.com), October 14, 1999.
Seth Glickenhaus says that for every trillion dollars the Fed has pumped into the economy, [an increase in the supply of dollars backed by NO supporting increase of goods and services], the market has risen about a 1000 points...
calculate the reciprocal of that and you'll have the amount of purchasing power YOU lost with those same dollars...[around 99% since 1965 or so]
-- Perry Arnett (firstname.lastname@example.org), October 14, 1999.
As I recall, the price of the cheapest new car was about 1/4 what it is today in dollars. The house I live in also cost about 1/4 as many dollars when it was built (in 1965) as I paid for it, in a very stable neighborhood. I'm sure some people here have better numbers, but we appear to have lost about 75% of our purchasing power since then, not 99%.
-- Flint (email@example.com), October 14, 1999.
Yeah, Flint, it's maybe "only" 75% since 1965 or so. The 99% is from about 1940.
-- A (A@AisA.com), October 15, 1999.