From The Dow Jones-Irwin Guide to Stock Market Cycles by Michael Hayes (1977)-----
Calling all fools:
"Inspired by good and improving earnings reports, some analysts begin to issue stock recommendations based on earnings growth projected many years into "a new economic era" of the future. Rationality often gives way to greed as the "greater-fool" strategy characterizes the speculative demand for secondary issues." (p. 98)
Actually, Mr. Hays got it wrong. The "new economic era" (i.e. the can't-lose internut economy) recommendations are not based on earnings growth. As bb has been saying, "there is no growth."
Oh com'on! You old fuddy-duddy! You are probably too old and stuffy to realise that this really just the beginning of the new economy, endlessly fueled by silicon, broad bands and big pipes, and dot.coms. It can't stop, there is just too much money to be made. Stand on the sidelines and you'll be sorry. Get on board and it's your ticket into the glorious future.
"As the typical stock approaches its speculative peak, the more conservative investors who still hold the high-quality group are much demeaned for failing to "get with the action."" (ibid.)
The market begins to break:
"Eventually, when professional forecasters begin attaching numbers like, 1,400 to their predictions, something happens and the Dow begins to break. Perhaps profit-taking, perhaps a political or economic mishap, or perhaps dumping by those wise enough to recognize fantasy. Usually, the reason for the break in the Dow is not obvious at the time. Only after a serious rally attempt has failed and a few months have passed will the deteriorating business conditions become evident." (ibid.)
With all good wishes,
David Todtman |
