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I don't think we can make a bottom until the investing public identifies
an alternative to the stock market. There is still too much latent
optimism to stock prices for a real long term bottom to form. What do I
mean by latent optimism? A good example is the use of long term returns
in excess of fixed income returns (ie, 'higher' equity-based returns) in
the assumptions used by corporate pension funds. IOW, we don't hit a
long term bottom until bonds are again seen as safer than stocks.
The growing federal deficit may help bring this to pass, as increasing
debt raises LT interest rates while hurting corporate earnings.
Another problem in making a bottom in the US is the poor economic
performance in the rest of the world. For all the excitement caused by
the return to parity between the euro and the dollar, the reality here
in Europe is that the economy sucks. The situation here is much worse
than in the US, with less flexibility to find a solution. The rest of
the world is providing little help, except maybe South Korea. The kind
of scenario we need to really bottom in the US is for a dramatic surge
in confidence in places like Turkey, Russia and China. Otherwise, too
much foreign money will stay invested here.
JMHO
DanG
BobsKC wrote:
>
> Many of the 50-60 folks who are coming into retirement have had most
> of their savings chewed up by this bear market and they won't give up
> trying to get it back. For a 30 year old, bonds could be a viable
> solution but when you have 5 years left to work and your retirement
> has gone from $500K to $50K, you will try to get it back and there are
> two legal means to do that. The markets and Vegas. Add to this the
> current interest rate returns and people are faced with less income
> than the real inflation rate. The excesses of the 90's are being
> wrung out but it isn't a fast process and it most certainly isn't a
> painless process. With each passing week, I see more and more truly
> good values in the equity market but I still see many others which are
> priced far beyond any reasonable common sense. All is doom and gloom
> now .. people are simply sick of the stock market. Shorters are
> thinking it can't end and fear is rampant. Not saying we are at a
> bottom but the signals are beginning to light up.
>
> Good trading,
>
> Bob
>
> At 12:51 PM 7/13/2002 +1000, you wrote:
>
> > What about the ageing population? In my mind this is what is going
> > to keep the stock market down for years.
> > Bonds , Annuity income and low risk returns will be king. Risk
> > aversion and wealth protection are the key, not
> > wealth creation , particularly when we talk about the masses.
> >
> > Infernal Elk wrote:
> >
> >>
> >> john, if you look at the major averages since march 2000, you
> >> might
> >> say that we've ALREADY been in a bear market for at least 2 years.
> >> so
> >> the low end of the duration you cite (9 months) is already out of the
> >> question.
> >>
> >> apart from reciting a bunch of statistics, what are you saying here?
> >> what "odds" are you referring to? what period(s) are you
> >> comparing
> >> against?
> >>
> >> - *lk
> >>
> >>
> >>
> >> >>
> >> >> I can not comment on the DJIA forecast but I do know this:
> >> >>
> >>
> >> >>
> >> >> 6/3/92 to 6/3/02
> >> >>
> >>
> >> >>
> >> >> DJIA went from 3,406.99 to 9,709.79 or up 185% annualized at
> >> >> 11.04%
> >> >>
> >>
> >> >>
> >> >> Nas went from 589.93 to 1,562.56 or up 164.8% annualized at
> >> >> 10.23%
> >> >>
> >>
> >> >>
> >> >> S&P 500 went from 414.59 to 1040.68 or up 151.01%
> >> >> annualized at 9.64%
> >> >>
> >>
> >> >>
> >> >> Wilshire 500 went from 4,024.34 to 9,865.09 or up 145.14%
> >> >> annualized
> >> >> at 9.38%
> >> >>
> >>
> >> >>
> >> >> Inflation [CPI] went from 140.20 to 179.80 or up 28.25%
> >> >> annualized at
> >> >> 2.52%
> >> >>
> >>
> >> >>
> >> >> It is entirely within some realm of possibility that the worst
> >> >> case
> >> >> scenario on the DJIA may play out but one must look at the odds.
> >> >> >From
> >> >> studies I recall major bear markets can last up to 17 years and we
> >> >> have not had too many of those. Most recent bear markets have been
> >> >> of
> >> >> shorter duration as low as 9 months to 3 years.
> >> >>
> >>
> >> >>
> >> >> When pessimism is that great it is an extreme. There are 3
> >> >> things I
> >> >> have learned that I think apply here.
> >> >>
> >>
> >> >>
> >> >> 1. Do not fight the Fed
> >> >>
> >>
> >> >>
> >> >> 2. Do not fight the trend
> >> >>
> >>
> >> >>
> >> >> 3. Beware the crowd at extremes.
> >> >>
> >>
> >> >>
> >> >> I give credit to Wachovia for the bulk of this info.
> >> >>
> >>
> >> >>
> >> >> Sincerely,
> >> >>
> >>
> >> >>
> >> >> John
> >> >>
> >>
> >>
> >>
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> >>
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