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Make no mistake about it: Disco is dead
The greatest innovations of the '70s were ugly shoes, disco, and Gerald Ford's WIN buttons. Back then, prices were skyrocketing, jobs were tough to come by, and you could only gas up on days that started with a T. Doesn't quite hold a candle to full employment, modern computing and the Internet, does it?
Let's face it: The world is a very different place now, and it's going to change even more over the next few years. We are already seeing the signposts that will point the way. Despite the spending spree, retail stocks are not enjoying a universal rise.
The year 1999's holiday consumer orgy will have record-breaking volume. But it will also see strong downward pressure on prices from cost-conscious e-shoppers (my wife searched 32 sources for the new stroller and will be ordering diapers bulk from some joint in Taiwan).
The big squeeze
Eventually, business-to-business transactions will reach the level where they can reduce production costs to the same extent, but not in time for Christmas. Add falling margins and increased payrolls to climbing gas and delivery costs and you'll see a record-breaking retail squeeze this winter. Some companies are already showing signs of distress.
Alan Greenspan doesn't see the benefits of the new paradigm, just its downside. So even if inflation is only some figment of his imagination, he's going to fight it tooth and claw. That means that by the time you read this, there will have been another quarter point interest rate hike.
And beyond that, Y2K still looms over the market. Even if the fabled glitch turns out to be more of an annoyance than an out-and-out disaster, both Y2K prep and fallout will still take out a chunk of the market over the next 8 weeks.
I definitely see a triumph of the NASDAQ over the S&P 500 during this period, with NASDAQ's weighting towards innovative, solutions-oriented, high-tech and biotech stocks giving it a strong competitive edge. The market's belief in this edge is clearly demonstrated by its chart, which shows strong upward trendlines well into the next quarter.
Please read on...
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