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Strategies & Market Trends : Waiting for the big Kahuna

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To: William H Huebl who wrote (41864)	7/18/1999 11:26:00 AM
From: Skeet Shipman	of 94695

Bill, Thanks Here is a story about bubbles. To keep with the theme of this thread and to point out some possible logical inconsistencies in the article: "Is This A Speculative Bubble?" foxmarketwire.com I will use Geraghty's own comments to foretell a different story. THE END OF THE LEMMINGS' BUBBLE THE LEMMING EFFECT "A true bubble would be formed if investors took the 'lemming effect' and believed the same story; (that is) they believed that prices were continually going to rise. " THE LEMMINGS "In today's stock market, there's a whole spectrum of people who are buying a wide range of mutual funds and they are buying not because it is discretionary investing but rather because it is compulsory investment for their 401(k) retirement plans." THE ONLY GAME IN TOWN (Another part of the same story) "People have to put their pension money somewhere and the stock market is the only game in town." THERE ARE ALWAYS ALTERNATIVES "the only game in town" - If the Japanize had thought they were in a bubble and invested in almost any stock market outside their own in the late 1980's, they would have avoided the crash. There are always alternatives: bond funds and international funds, etc. THE KEY IS TO KNOW WHEN TO LEAVE THE BUBBLE Greed to maintain past percentage growth is what keeps most lemmings in the market. When they no longer believe past percentage growth predicts future performance, their 401(k) funds will leave the US market. AND THAT IS THE END OF THE STORY! (Assuming rational behavior when analyzing irrational situations is itself inconsistent. However, this story does imply it may not take a major trigger to begin deflating a bubble. The anticipation of a level market with no mutual fund appreciation may suffice. Following this thought one also concludes that after the initial enthusiasm bubbles are unstable.) (The association between excess spending and the market has two levels: First, the direct relationship: the higher or lower the market the higher or lower the spending. Second, the rate of change relationship: the faster or slower the market's upward movement the higher or lower the excess spending. Now, spending equates to corporate revenues and earnings; therefore market expectations. When reaching this stage on difficult problems most text book authors write: The conclusion is obvious.) (Of course, the above story is about a hypothetical bubble and says nothing anybody didn't already know.)

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