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I picked up a little book the other day called: "How to survive the coming
Mutual Fund Crisis" by Donald Christensen. The book was published in '94,
and predicted the crisis would begin in '96 or '97. He makes some excellent
points on an historical basis and the parallels between today's Mutual
Funds and the Investment Trusts of the '20's are pretty striking, but, as
AG stated at his last H-H testimony when pointedly asked if we have a "New
Paradigm", "something different" seems to be happening here, which has, so
far, defied the predictions of everyone (except the Bulls, of course).
I think that "something different" is not something that's inherent in the
market itself, but rather due to a unique set of circumstances: the US
market is the only major market left standing (maybe the DAX too) and is
still attracting huge inflows (as AJ stated), the (myserious?) absence of
inflation where, near the end of a cycle and given tight labour mkts, it
should be rearing its ugly head. The "fine balance" AG mentioned a few
months ago between inflation & deflation (which, if I recall correctly, he
said "could not be maintained indefinitely") may make the Asian disaster
actually a plus (for now, barring further devaluations). The Bulls
certainly are spinning that way, and in mkts (as in politics), perception
is reality (up to a point).
The author also states that one of the signs of the existence of a Mania is
an unassailable confidence that the present conditions will continue
indefinitely. We certainly have that, but it seems to be confined to Mutual
Fund investors only as the still thin volume would seem to indicate that
most of the "smart money" is still on the sidelines waiting for this "fine
balance" to break out one way or the other.
Anyway, I'm glad, at least, that I'm not the only one who is more than a
bit boggled by these "something different" markets.
John Stevenson
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