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AJ - My ideas below regarding your responses. Some of what you said is
more from my not being totally clear, but some stuff I just disagree
with. See below.
> I agree that charts do tell the story, but if you look at a daily chart of the
> SNP, there isn't anything to be alarmed about.>>THAT IS A MATTER OF OPINION. I THINK WE GET TO THE MID-9000s AND THEN FALL, BUT THOUGH I WOULD SELL RALLIES, THAT IS ASSUMING I HAVE A SIGNAL FOR IT (THAT IS, NOTHING HAS CHANGED FROM WHAT I CURRENTLY SEE). YOUR POINT BELOW IS EXACTLY RIGHT. UNTIL I SEE THE TREND REVERSED, I WOULD STICK WITH IT, BUT JUST BE MORE CAUTIOUS. IT ALSO DEPENDS ON HOW THE NEXT LEG HIGHER DEVELOPS WHICH COULD LEAD ME TO CHANGE MY TARGETS. I NEVER DRAW LINES IN THE SAND OUTSIDE OF FOR SOUND MONEY MANAGEMENT PURPOSES.
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> > THE FUNDAMENTALS OF COURSE
> > DRIVE THESE CHARTS, SO ONE MUST USE BOTH OR HE/SHE WILL BE VERY SORRY.
>
> No they don't. Only one thing drives charts - supply and demand. -AND WHAT DRIVES SUPPLY AND DEMAND??? THIS IS ALSO A VERY LONG TERM RELATIONSHIP AND ONE THAT I DO NOT THINK CAN BE TRADED, AS PRETTY MUCH IS THIS WHOLE THREAD.
----------------------------------------------------------------------->
> > THOUGH WE HAVE NOT MADE NEW HIGHS, I STILL THINK THERE COULD BE (SHOULD
> > BE) A MINOR NEW PEAK, BUT IN GENERAL, I WOULD BE SELLING RALLIES IN
> > STOCKS AS I DO EXPECT A DROP OF 38-62% OVER THE NEXT FEW YEARS IN THE
> > DOW. JUST NOT FOR ANOTHER FEW MONTHS.
>
> I'd be *real* careful here, especially of you are shorting them. Long term,
> there isn't any reason why stocks can't rise close to their current rate for the
> next 10 years at least.
I SUSPECT THAT DEMAND WILL CHANGE AS DEMOGRAPHICS CHANGE OVER THE NEXT
FIVE-TEN YEARS. I DID NOT SAY THAT AFTER 38%-62% THAT THE MARKET WOULD
NOT SOAR TO NEW HIGHS EITHER. I LEAN MORE TO THE IDEA OF 38%. REMEMBER,
WE HAVE HAD 10% CORRECTIONS IN MATTERS OF DAYS ALREADY. IF WE SPEND 6-12
MONTHS WHY COULD WE NOT TRADE DOWN 38% FROM A HIGH NEAR 9500.
----------------------------------------------------------------------->
> You can't. Some principles of TA still apply -HUMAN BEINGS HAVE NOT CHANGED AND TA IS BASED ON CROWD BEHAVIOR. THE TOOLS MAY HAVE CHANGED, BUT I DO NOT THINK CROWDS HAVE CHANGED SIGNIFICANTLY. I WOULD GUESS THAT IS WHAT THE SOCIOLOGISTS WOULD SAY TOO. SO THE PATTERNS AND ULTIMATELY MARKET BEHAVIORS WILL PROVE THAT TA HAS NOT REALLY CHANGED THAT MUCH OUTSIDE OF YOU NEED TO BE FASTER SINCE INFO IS DISSEMINATED MORE QUICKLY
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but ancient data isn't very valuable anyway-FOR DIRECT TRADING DECISIONS
PROB NOT, BUT FOR MARKET PSYCHOSIS ETC, I THINK THEY ARE USEFUL GUIDES.
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>
> >AS FOR THE NEW PARADIGM, THAT IS A VERY MISUNDERSTOOD TERM. THERE IS NO
>
> > NEW PARADIGM. WE HAVE HAD LOW INFLATION AND STRONG GROWTH BEFORE.
>
> This has little to do with inflation or even growth. The reality of the market
> has undergone enormous changes lately - to the extent that there really isn't any
> serious competitor for capital anymore. This has been caused partly from a
> strong economy, but more so by the scope and magnitude that equity investing has
> taken on. Nowadays, just about every Joe is pouring a large part of their income
> into the market. People have become addicted to its returns, and now require
> them to meet their financial goals. As long as this continues, it will take a
> serious economic event to put a real halt to this.>>LIKE MAYBE THE DESTRUCTION OF CAPITAL IN ASIA? I HONESTLY THINK THAT THE DOWNTURN WILL NOT BE THAT BAD (closer to 38% than 62%) CUZ ASIA IS GIVING US PART OF THE CORRECTION. IT IS PROBABLY WAY TO NEARSIGHTED TO JUST LOOK AT THE U.S. CHART. MAYBE WE SHOULD CONSIDER GLOBAL EQUITY VALUES.
---------------------------------------------------------------------->
> > WITNESS THE 50S AND 60S. STOCKS THOUGH DID NOT DO THIS WELL.
>
> For sure - even the 70's. And the 90's are the best yet. This is mainly because
> aggregate capitalization is growing, which is directly related to stock prices
> (in the aggregate, they are identical).>>ALSO WITH MERGERS AND ACQUISITIONS, THE SUPPLY OF STOCKS ARE FALLING.
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> > PRODUCTIVITY I THINK,IS UNDER MEASURED, NOT OVER ESTIMATED TOO. I AM
> > HUGELY MORE PRODUCTIVE WITH THE NET, EMAIL ETC THAN I WAS YEARS AGO. SO THIS IS NO NEW PARADIGM.
>
> Productivity has little to do with this either.
LET'S SEE NOW. I CAN PRODUCE 10 WIDGETS FOR $10 THEN SUDDENLY I CAN
PRODUCE 15 FOR THE SAME PRICE. NOW I MAKE MORE MONEY EVEN IF I DROP MY
PRICES. SOUNDS LIKE WHAT IS DRIVING THE MARKETS TO ME. IF YOU DO NOT
THINK LOW INFLATION AND PRODUCTIVITY ALONG WITH LOW SUPPLY DUE TO M&A AS
SUGGESTED EARLIER ARE NOT THE MAJOR DRIVING FORCES (THIS INCLUDES CHEAP
LABOR IN ASIA AND LATIN AMERICAN AND EASTERN EUROPE) FOR THE VERY LONG
TERM, THEN THOUGH THAT HAS LITTLE TO DO WITH SHORT TERM TRENDS, THEN YOU
ARE MISSING THE BOAT. OF COURSE, I SEE NO REASON FOR PRODUCTIVITY TO
FALL, SO U R SAFE THERE.
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However, it is true that productivity has increased, although perhaps
not yours.
THEN WHY DID YOU BOTHER RESPONDING?
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>
> > AS FOR TECHNICAL ANALYSIS NOT BEING USEFUL IF THERE IS A NEW PARADIGM, I
> > WOULD SUGGEST THAT YOU ARE MIXING APPLES AND ORANGES. TECHNICAL ANALYSIS
> > IS BASED ON CROWD THEORY AND HUMAN BEHAVIOR AND THAT HAS NOT CHANGED.
>
> It has changed quite a bit, but that's beside the point. Situations are
> constantly changing, and TA that worked a year ago may fail miserably today.
> There still are some classic principles, such as support and resistance, that
> hold throughout, but the "crowds' of yesteryear aren't the "crowds" of today.
SOME INDICATORS DO NOT WORK EXACTLY AS PEOPLE THINK THEY SHOULD, MORE
BECAUSE TIME FRAMES ARE DIFFERENT. ALSO, EVERYBODY USES
OVERBOUGHT/OVERSOLD INDICATORS, BUT OVERBOUGHT GETS MORE OVERBOUGHT IN A
TREND. AND DIVERGENCES ALSO ARE MISUSED. BUT, TO SAY HUMAN BEHAVIOR, AND
THUS CROWDS HAVE CHANGED IN HOW THEY REACT TO FEAR AND GREED, IS JUST
PLAIN BASED ON NOTHING BUT YOUR OWN OPINION.
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>
> > THE NEW PARADIGM SAYS NOTHING ABOUT THIS (AND AGAIN, I DO NOT BELIEVE
> > THERE IS A NEW PARADIGM AND I ALSO THINK THE STOCK MARKET IS AT OR NEAR
> > A TOP ANYWAY, SO I AM NOT DISAGREEING WITH YOU IN THAT PART OF YOUR
> > ANALYSIS.)
>
> What makes you think it's near a top? You have to realize that if more money is
> going in than coming out, markets MUST rise. And, IMHO, there really isn't any
> good reason to think this won't continue for years to come.
AS EXPLAINED, BY TOP I MEAN 38-62% CORRECTION WHICH, IF IT IS THE
FORMER, WOULD ERASE BARELY MORE THAN 1 TO 1 1/2 YEARS OF GAINS. THE
DEMOGRAPHICS START GETTING LESS POSITIVE IN A FEW EYARS UNLESS SUDDENLY
THE EMERGING MARKETS GET WEALTHY ENUF TO START INVESTING, OR ALL THOSE
ZILLIONS OF PEOPLE WORKING IN THIS COUNTRY FOR $8.50 BUY STOCKS INSTEAD
OF MILK.
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> > STOCK PRICES MUST EVENTUALLY FALL.
>
> Not really. In fact, historically they have always risen long term, and that has certainly been true lately.
AGAIN, BY FALL I MEAN A CORRECTION. REMEMBER WE WENT SOMETHING LIKE 10
OR 20 YEARS WITH NO GAINS, AND IN FACT LOSSES ON AN INFLATION ADJUSTED
BASIS IN STOCKS THRU THE EARLY 1980S.
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> > NOTE THOUGH THAT IF THE MARKET
> > ADJUSTS TO LOWER INTEREST RATES IF THAT IS WHAT YOU BELIEVE, THAN PRICES
> > CAN RISE FURTHER.
>
> Lower interest rates in itself stimulates higher prices. Higher interest rates
> could slow down growth, but probably would be insufficient to reverse things.
>
> > FOR EXAMPLE, BASED ON THE DIVIDEND DISCOUNT MODEL, THE
> > PRICE OF A STOCK IS DISCOUNTED BY THE SUM OF ITS EXPECTED DIVIDENDS
>
> This is just a model, and is especially uninformative in the aggregate,
> especially today.
>
> > DISCOUNTS BY (1+Y)^N WHERE Y IS YIELD AND N APPROACHES INFINITY. LOWER
> > YIELDS RESULT IN HIGHER FAIR PRICES.
>
> This is the way bonds work, but certainly not stocks.
IT IS NOT A DIRECT RELATIONSHIP FOR STOCKS AS IT IS FOR BONDS (AS FAR AS
BEING FORMULAIC), AND IT IS JUST A MODEL OR THEORY, BUT IN THE BIG
PICTURE, WHICH IS WHAT I THOUGHT THIS THREAD WAS ABOUT, IT IS MOST
CERTAINLY RELEVANT.
>
> > STILL, THAT IS LARGELY DISCOUNTED
> > PROBABLY ALREADY, SO STOCK PRICES SHOULD FALL FAIRLY SOON. AND THAT IS
> > WHAT I EXPECT.
>
> I hope you're not betting the farm on this.
I DON'T BET THE FARM ON ANYTHING.
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>
> > INFLATION DISCUSSED ABOVE. BALANCE OF TRADE IS QUESTIONABLE SINCE A
> > LARGE PART OF IT IS ASIA AND MUCH OF THAT IMBALANCE IS US FIRMS RE
> > EXPORTING FINAL PRODUCTS THAT THEY SHIPPED THE RAW MATERIALS TO ASIA IN
> > THE FIRST PLACE (NIKE, INTEL).
>
> I agree that the balance of trade isn't particularly worth mentioning here,
> although it can impact sectors - the overall market should not be affected too
> much by this.
>
> > CHAOS IN FGN MARKETS ALSO BAD AND GDP GROWTH NOT A PROB IF DOES
> > NOT LEAD TO IMBALANCES CAUSED BY INFLATION AND THEN ULTIMATELY LEADING
> > TO AN OVERLY RESTRICTIVE FED AND THEN A RECESSION OR WORSE.
>
> I don't really see this happening anytime soon though.
NOR DO I. JUST THROWING OUT A POSSIBILITY. BUT GREENSPAN IS TOO SMART TO
LET THAT HAPPEN.
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>
> > BUT AGAIN, I
> > THINK WE ARE SET UP FOR BIG TROUBLE TO START IN THE NEXT FEW MONTHS AS
> > THE BALANCE OF THESE FACTORS ARE CLEARLY NEGATIVE FOR THE MARKET.
>
> There's only one way for the market to suffer long term, and that's through a
> significant outflow of capital. Wile the factors you mention could have an
> affect on this, I seriously doubt that the effect would be anywhere near enough
> to cause the downturn that you are predicting.
I AM PREDICTING 38-62%, MORE LIKELY CLOSER TO 38%. BUT IT IS FOOLISH TO
SAY WORSE IS NOT POSSIBLE. IT IS EQUALLY FOOLISH TO SAY WE CANNOT
CONTINUE SOMEWHAT LONGER IN THIS DIRECTION TOO, BUT I AM FORECASTING A
SERIOUS CORRECTION.
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> > MAYBE THAT WILL SHOW UP AND MAKE THE 38-62% DROP
> > THAT I EXPECT, 62-90%, BUT I DOUBT IT IS THAT BAD.
>
> Wow - you are bearish! I really don't think we'll ever see these levels unless
> an all-out panic hits - which is very unlikely in my view within the next few
> years. 10 or 15 years down the road, when the baby boomer withdrawal really
> starts to hit, it may be another story.
62-90% WAS IF THE THINGS JOHN STEVENSON SUGGESTED ALL HAPPENED TOGETHER.
I WOULD SAY THE ODDS OF ANYTHING LIKE THAT ARE BARELY MEASURABLE RIGHT
NOW. I WAS UNDER THE IMPRESSION THAT BOOMERS START WITHDRAWING NET BY
2005, BUT SLOWDOWN IN GROWTH COULD LEAD TO EARLIER PROFIT TAKING SINCE
IT IS ALL PRETTY WELL ADVERTISED, BUT I AM NOT TALKING THAT LONG TERM
ANYWAY.
-------------------------------------------------------------------->
> > BUT, REMEMBER THIS.
> > WE TEND TO REMEMBER BAD THINGS LIKE PRICE INCREASES, MORE THAN WE
> > REMEMBER PRICE CUTS. HOW MUCH CHEAPER IS THE COMPUTER U SENT THIS
> > MESSAGE ON NOW THAN IT WAS SIX MONTHS AGO (MINE IS DOWN 40-70%). AND
> > THINK ABOUT THE REALTIME DATA DISCUSSION WE'VE BEEN HAVING. IT IS HUGELY
> > CHEAPER NOW THAN A FEW YEARS AGO!!!
>
> Not really - it's better though. It costs more and more for the best technology
> - I end up paying more and more for computers <g> - and they become pretty much
> obsolete in a year or so.
I GUESS YOU DON'T KNOW WHERE TO BUY COMPUTERS. THE TOP OF THE LINE IS NO
LONGER NECESSARY CUZ SOFTWARE HASN'T KEPT UP AS MUCH AS IT HAD A COUPLE
YEARS BACK. FURTHERMORE, THE TOTAL PRICE FOR TOP EQUIPMENT WAS OVER
$4000 BACK WHEN THE 386 CAME OUT, AND YOU CAN NOW BUY A LOADED 400MHZ
FOR UNDER $3000!
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>
> > JOHN - BASICALLY I AGREE WITH THE IDEA THAT THE MARKETS ARE DUE FOR BIG
> > TROUBLE (STOCKS ESPECIALLY). THE BASIC REASON IS THEY ARE OVER VALUED
> > BASED ON ANY REASONABLE MEASURE AS U SUGGESTED. WHERE I DISAGREE IS
> > SIMPLY ON BLAMING IT ON MISINTERPRETATION OF INFLATION DATA, THE
> > SO-CALLED NEW PARADIGM, OR USING CHART ANALYSIS. GOOD WORK. CANNOT WAIT
> > TO SEE OTHER RESPONSES.
>
> What do you mean overvalued? Prices are always valued fairly efficiently - which
> is what people are willing to pay for them. Again - there is NO necessary
> connection between prices and earnings in the aggregate.
>
> In conclusion, we cannot properly gage long term market trends by relying on
> either dated charts or tangential factors. Supply and demand, and the factors
> that contribute to them directly, and the degree of these effects, remain the
> sole valid way to arrive at an accurate picture of trends, and this is all the
> more true today.
>
> Regards,
> A.J.
ADMITTED, BY OVERVALUED, I AM USING STANDARD TECHNIQUES. BUT, UNLESS U
BELIEVE PRICES ARE SUPPOSED TO KEEP RISING PARABOLICALLY...SUPPLY AND
DEMAND ARE KEY, BUT YOU SEEM TO THINK THAT DEMAND IS GOING TO KEEP
SHIFTING UP WHILE SUPPLY KEEPS SHIFTING DOWN. THAT IS A MIGHTY LARGE
ASSUMPTION.
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