Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next
Author: solasis Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 297  
Subject: read this Date: 10/14/2002 4:23 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Q:In 1982, S&P index futures were introduced. Back then I remember a friend's explanation of why he went bullish in October 82 and went sailing. "The Index guys have forever changed the market place. Can't go short this market for a while. October 25th is set to be the launching date of OneChicago, LLC Single stock futures. Is this potentially bulish as well?

A:The periods could not be more different. In 1982 we were breaking the back
of a major stop-go economic inflation cycle that had brought stock values
very low over a prolonged period. We were viewed as weak in international
affairs as evidenced by the Iran hostage crisis. We had suffered from
increasing government intervention into the economy and expensive social
programs introduced by both Republican and Democratic presidents. Carter's
appointment of Volcker to head the Fed and then Pres. Reagan's election
changed all that. We were entering a period of much lower inflation and
faster economic growth prospects once the adjustment was out of the way and
doing so from a very depressed level of stock prices. Relative to that the
introduction of index futures was a small factor. In contrast, we have now
had a long period of economic growth that was about as good as it gets. That
had the effect of creating some excess and very optimistic valuation of
stock prices to reflect that envirnoment. We have had a short period of
adjustment as we worked off some of that excess and confronted some new
problems in the environment. Stock prices have given up a substantial
portion of that excess valuation. By many standards they are not viewed as
cheap, whereas in 1982 they were clearly cheap with any sort of decent
economic growth prospects. In short, the basic dynamics are quite different.
This may turn out to be a good time to buy, or it might not, but the
introduction of new futures instruments will at most play a small part in
determining the magnitude of stock price changes in the overall market.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Smuggling Rice and Garlic
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement