A little stock advicegreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
I'm not a financial whiz kid - any opinions on the article, please?
WHY THE BUBBLE WILL LAST TILL JANUARY By JOHN CRUDELE --------------------------------------------------------------------- ONCE this week is over the stock market could be in a good position for a nice rally. The end of the year is almost always a good period for the stock market.
Investment managers don't like to see their yearly performance erode at the last minute. And the ones that are big enough, like those at the major mutual funds, usually can rally the closely watched blue-chip stocks with ease.
This being the end of the decade as well as the conclusion of the millennium, managers will want to keep their stock portfolios looking especially good. This sort of activity goes by the innocuous name of "window dressing" on Wall Street, but you might recognize it as manipulation.
The only thing that gets in the way of these money managers' plans are news events. This Friday's release of the government's latest monthly employment figures as well as a private inflation calculation will be the biggest hurdles for the stock market in December.
But once that's over with, the bubble looks like it'll be in good shape until at least the end of the month, when Y2K mania might hit.
Wall Street is especially lucky that the government's employment figures are coming out early this month. The rule is that the number of new jobs the economy supposedly created is publicized on the first Friday of each month, which happens to be Dec. 3. That's one of the earliest releases possible.
So even if the figure is disappointing to Wall Street (meaning that it shows too many new jobs), the stock market will probably have time to shake off the bad news and enjoy its traditional year-end rally.
The investment community is anticipating that 200,000 new jobs were created in November, compared with about 300,000 in October. The October figure was less than expected, so the bond and stock markets were able to rally in hopes that the Federal Reserve would refuse to raise interest rates. The Fed raised rates anyway.
And anyone who bet on bonds based on that employment number lost a bundle. The stock market has just kept rolling along.
I've already argued the point many times that the Labor Department's figures are worthless and that the Fed ignores them in determining monetary policy.
But Wall Street still uses the job numbers to move stocks up and down. So, will more jobs than expected be reported next Friday? There's really no way to know, since arcane seasonal adjustments to the numbers will have more to do with what is reported than anything the economy is actually doing.
If the number of new jobs created is much greater than 200,000, bonds will get further hammered, and the rally in stocks could be delayed till late December.
Friday is also the day that the Economic Cycle Research Institute will release to customers its Future Inflation Gauge (FIG).
And Friday's figure isn't likely to comfort people who want rates to stay put.
While the ECRI doesn't report its weekly figures, a source tells me that its inflation gauge is still climbing. Either the employment report or the FIG could send interest rates on the government's 30-year bond quickly from their current level of about 6.23 percent to 6.50 percent.
And either economic report on Friday could stall any further rally for a week or so. There's little chance Greenspan will be pushed into his fourth interest rate hike of the year at the Fed Open Market Committee meeting Christmas week, even if Friday's numbers are inflationary.
Producer prices will be released on Dec. 10, and the Consumer Price Index comes out a few days later. The CPI could show a big jump in inflation, but even then Greenspan's hands will be tied. The Fed chairman doesn't want to be the retailers' Scrooge.
But he's probably also very nervous about taking any action that might rile the markets before the world sees what computers will -- or will not -- do when the calendar turns on the millennium.
One other potential problem for stocks late this year: Since 'Net stocks are still rocketing on forecasts for e-tailing, any sign customers aren't using their computers to avoid the mall could be troublesome.
If you are a bubble player, this month should be relatively safe after Friday. But it might be smart to lighten up on stocks before the ball drops in Times Square.
-- Deb M. (email@example.com), November 29, 1999
I like the term "bubble player". Here is some additional and similar, albiet more bleak, information on the bubble.
-- TA (firstname.lastname@example.org), November 29, 1999.
-- TA (email@example.com), December 05, 1999.