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John,
Good observations and comments. Some added comments:
1)- Another aspect that needs to be mention is the twenty some odd year low
level of cash reserves in mutual funds. If we have mass exodus from mutual
funds the mutual funds will have to sell stocks to cover redemptions. This
can only make a bad situation worse.
2)- Margin debt is out of sight. Since most of this margin is long, margin
calls will cause forced sales like 1 above.
3)- The very high valuations cannot be rationally justified. About eight
years ago when the Japan market was so high, I believe 45,000, I recall all
the experts justified high valuations due to high growth and because
Japanese companies were big holders of their competitors stocks. Thus there
was a big cushion supporting the market's PE of 70. A year or two later
their market fell to 15,000! Today the justifications for the US high
valuations is that we have entered a "New Era" and a "New Paradigm Internet
Economy." That kind of talk is scary to me.
With all this said, my own investment policy is capital preservation. I
stepped aside in early January and greatly reduced my US equity market
exposure. Later this year when the time is right, I can pick up the
bargains with my money market reserves.
Marlowe
PS: I got my first share of stock in 1943.
----- Original Message -----
From: Dr. John Cappello <jvc689@xxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, February 25, 2000 9:44 PM
Subject: Market Direction-Dow/S&P
>
> I am neither a Bull or a Bear but having bought and sold stocks since I
was
> 16 years old [and yes they let me do it at the time-Merrill Lynch] these
are
> my thoughts as an observer of many posts:
>
> 1.By definition we are in a Bear market.That is greater than a 12.5% Dow
> decline.Currently we have hit about a 17% decline.
>
> 2.We have already hit the 3 step and stumble rule of interest rates.And
> T-Bond yields have negated the increases to date.
>
> 3.Value is returning to many stocks conventionally valued.
>
> 4.Janus which has the ability to time niches is bringing out the Strategic
> Value Fund as previously indicated at a very interesting point in time to
be
> funded.
>
> 5.Buffet just made some big value purchases.
>
> 6.In a good economy such as this Bear markets are short lived and if this
> one goes longer than 2 more months I will be surprised.In bad economies I
> believe Bear markets last on average 9 months to 3 years.
>
> 7.The Nasdaq 100 is a market unto itself and valued by parameters never
> before endorsed other than to high growth rate stocks and even beyond
that.
>
> 8.Ditto the micro caps.
>
> 9.Greenspan was fried at the Humphrey-Hawkins hearings and actually ate
crow
> on many responses although he "Greenspoke" his way out very well.
>
> My conclusions without astrology ,charts,Gann and what have you are these:
>
> A. We will see 12,500 on the Dow before we see 7500.
>
> B. We will see 1550 on the S&P before we see 1100.
>
> C. We will see 5000 on the Nasdaq before we see 3000.
>
> I also vividly remember 1987 and having a Blue Chip portfolio which I had
> sold covered calls on.The market tumbled and I did not lose any sleep
> because value returned and so did the total value of my portfolio and
> more.That was what I would call oversold by any standard.
>
> Sincerely,
>
> John
>
> P.S. Agilent is the next GE and some Dow stocks are a steal right now.
> Merck just to name one.
> ______________________________________________________
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>
>
>
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