OT sort of: Yardeni talks about the stock bubble and Y2K

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Just got this mass e-mailing from Dr. Yardeni's site. Some of this we've heard before about the stock market, some of it is a slightly different spin on things. I thought the comment about possible mis-filings (my paraphrasing) sounded so Y2K-ish . . .

--start snip

Since the start of the year, I've argued that the bull market in stocks was turning into a speculative bubble.

--some stuff deleted

I've also concluded that some companies are using questionable accounting practices to overstate profits. The SEC is investigating this issue. I hope they do more than they've done to prod corporations to provide better disclosure about Y2K. I think Y2K could burst the bubble, but more and more investors are asking me, "What if Y2K is a nonevent like 9/9/99?" I never expected this date to be a problem. I still expect 1/1/00 will be. But, if I'm wrong, then the bubble will get bigger in 2000, and it will burst for the same reason that bubbles have always burst, namely tighter credit conditions.

--end snip

I can't close out my 401-K, so I think I'll stick with T-Bills for a while. Got VISA?

-- Margaret J (janssm@aol.com), September 16, 1999



Be careful with T-Bills (and I suppose T-Bill Funds is what you're talking about for a 401K). If interest rates go up, funds lose value. This hurt my mother in law bad in her IRA once. If you go short term bonds, and interest rates go up, WJC can turn your short term bonds into long term bonds by Executive Order.

The government and the FED are going to "tinker" with the economy, if things go bad. Having your money tied up in one of their control systems (and T-Bills are used by both the Treasury and Fed to control the economy)is dangerous IMHO.

Governments and central banks are going to do things which have unintended consequences, trying to maintain the status quo and their own power. You don't want negative unintended consequences to happen to you.

The other day I posted a disclosure of Al Gore's investments, I thought was interesting. Unlike the Clintons', his are not in a blind trust. They are all in hard assets which benefit from inflation. 0% equities.

I think you have to be diversified, or their attempt to control things with actions like the Bank of England Gold sale can get you. Here's how I reacted aa year ago:

10% gold fund

10% Short fund (Bearx and Rydex Ursa are two such funds)

25% Commodity fund ( Oppenheimer real asset is the only one I know of)

10% Company stock I cant do anything about without quitting

45% money market

-- ng (cantprovideemail@none.com), September 17, 1999.


I obviously don't know the specifics of your situation, but have you considered taking a loan on your 401-K? With just a little over 3 months (!) to go, interest payments on the loan will be minimal and you probably won't miss much in opportunity costs (if the market were to continue higher).

-- Clyde (clydeblalock@hotmail.com), September 17, 1999.

T-Bills have maturities of one year or less, T-Notes two to ten years, T-Bonds over ten years.

I would guess that if things did get so bad that the feds converted short term bills into long term bonds, then that would imply conditions so bad that garden variety money market funds would be problematic.



-- Jerry B (skeptic76@erols.com), September 17, 1999.

--ng and Clyde, thanks for the info. I wish my 401-K would let me choose the type of investment fund, but it is the government employee plan that has only 3 "vanilla" choices: stock fund, corporate bond fund, or Treasury bonds/bills. I did take a loan out last year, so I had immediate use of some of that money. The rest must stay put until I quit and I'm not ready to do that yet. I have resigned myself that if things go TEOTWAWKI then I will lose whatever is in that account. I shuffled percentages around (in case things go only a 4 or 5), but that's the best I can do for now.

Whew. It's wierd-making, trying to plan for all of the probabilities.

-- Margaret J. (janssm@aol.com), September 17, 1999.

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