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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 683.47

+0.6%

Nov 28 4:00 PM EST

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To: Gary Wisdom who wrote (21607)	7/30/1999 9:23:00 PM
From: pater tenebrarum	of 99985

Gary, admittedly the nutz have corrected sharply from their highs and may even be due for a bounce soon. but are they cheap? don't forget that AOL's 52-week low was 17 1/4, and if i had told you it would be at 100 a mere 10 months later would you have believed it at the time? yet it actually went to a high of 175, a ten-bagger in less than 6 months. the question is, is this really rational? what has occurred in those 6 months that justifies such extremes? to me it is actually quite simple: liquidity (which the Fed swamped the markets with to avoid a credit crunch) and greed. rising interest rates mean that one of these props is disappearing. and greed can turn to fear on a dime. i do of course acknowledge that AOL is a leader in it's field, and so are YHOO and AMZN, etc. and they all have had phenomenal growth, which is to say they deserve a premium. it's the size of the premium that's open to question and if you consider the fact that the market as a whole may be in need of a valuation adjustment, these stocks could decline further even if their premium stays the same. sorry for playing devil's advocate and have a great weekend too, regards, hb

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