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Most of those here know that I'm not a technician and don't put a lot of
stock in it. Even so, I have come to respect many members on this list for
the hard work they do and I have come to appreciate that when most of the
technicians agree on one thing, it is like to happen due to their belief,
if nothing else. I spent some time this weekend looking at the economy,
what large caps are saying and what the firms that supply them are
saying. My conclusion is basic.. I believe the tail is wagging the dog.
Some have compared the current situation to the democratic inspired mess of
the Carter administration and it's 22% interest rates , freeze on wage
increases etc. The Reich mess. (I probably mispelled his name). Lets see
where we are. We have low interest rates and they are dropping. We have
nearly zero inflation. We have a business environment that is healthy but
dropping off the greatest growth cycle in our history. Why is it
dropping? What is the catalyst?
In my opinion, it is the stock market. It's cutting 50-90% of a firms
market cap and the borrowing power and purchasing ability that goes with
that. Filter that down to the mid caps that supply them and the small caps
that supply the mid caps and you have a mess. Japanese banks aside, if
people begin to buy stocks again, I believe you'll see a magical recovery
in the economy. (Of course, the same is true for the end line consumer
once his/her savings/investments begin to recover as well).
Last, I believe this event/bearmarket/correction was needed and needed
badly. Now, the bubble is burst. The pie in the sky throwing money at a
dartboard of equity names is over. The throwing money at any .com stock
that comes along is over. The market is returning to common sense and
while this scares many folks into a panic and predictions of disaster, one
needs to consider what is wrong with the market and if it's just the market
itself, once it turns, the economy will turn with it and the shorts will be
just like the fanatics were two years ago .. they won't believe it can
actually go back up and will get hammered.
Anyway, I try not to post too often these days so I hope you'll tolerate my
ranting. :))
Good investing to all .. be nimble
Bob
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