Lee, Let me put forth the proposition that the last time the markets moved together was before the June/July 1996 sell-off. My research shows that this was the first example of the new-era liquidity driven market. The sell-off between the little puppies and the Big dogs demonstrated that the little puppies always feed on the scraps, the exit doors are too small, the sell-off are always exaggerated, and the Big dogs will always recover faster.
I guess I got some Buffett in me and I'm the last one to argue the case for the tech stock valuations. However, I'd rather own a stock such as MSFT or even a CSCO with their projected growth rates than IP or CHV, or other industrial cyclicals or energy stocks.
I noted to Robert the other night that I totally agree with Donald that we are in trading range with a slight negative bias. YTD 21 of the Big Boyz are negative for investment performance (about 1/3) and since 4/30 over half (35) are negative. This hardly represents the environment of a bull market.
EPS for these 65 Big Boyz was a median of .98 for 1993 and 1.87 for 1997. Therefore, I believe that the S&P Index increase from 466.45 to 970.43 was totally within the world of reason for this period of time. I further believe it was the timing of that third rate cut last year by Mr. G and company that created the current valuation problem. Thanks to this issue, the market went up 26.7% last year, while EPS only increased a median of 10%. Bang, the severe over-valuation was created, going from about 10% to about 25%.
Nevertheless, I have a real problem with the concept that last year our markets faced a problem because of the depression in Asian economies and this year we should believe that we face a problem because of their recovery. Thanks to Gersh, I've come to understand the Yen-Yank problem, but this seems to be a fixed income (interest rate) issue. I once, but no longer, had data relating to the percentage of U.S. equity investments by foreign investors and was surprised by how small it was. I have challenged the thread to produce some data to the contrary and have yet to receive anything to support a contrary position.
I could go on, but it's time for a nap. All this aside, I again state that the current TA is not very favorable. Then, we have the big unknown in the potential evaporation of liquidity because of the unknown of Y2K.
Berney |
