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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures

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To: Chip McVickar who wrote (36618)	10/16/1999 11:01:00 AM
From: Tom Trader	Read Replies (3) of 44573

Hi Chip -- I am here trying to catch up with postings that I am not able to respond to during trading hours. >>But I do believe, have for sometime, that we've been watching a bear leg form....and it may well last into July of 2000. I'm also beginning to look for psychological changes in the market buyers temperament and a swing back towards natural resource companies.<< Corrections will come and go -- some more severe than others. The one thing that argues against a major bear market -- at least while the economy is still chugging along -- is the continuous in-flow of funds from retirement funds which have no where else to invest the funds. For that source of funds to end, there will have to be either legislative changes or else there will need to be a sea-change in attitudes that cause people en-masse to refrain from investing their savings in the markets. I don't believe that absent some external trigger that the latter is going to happen. Now that is not to say that the valuations are anything short of ridiculous in some of the major names that make up today's nifty fifty -- and at some point something will occur to bring these valuations back to earth -- but I suspect that the funds will be re-directed to other sectors of the market that are not over-valued. It is ironical how history seems to repeat itself. I recall that in the mid-70s after the initial surge in oil prices it was the prevailing wisdom that with the quadrupling of oil prices, a continued increase in oil prices was a given. Thereafter, after 1979 and the Iran crisis, when oil got to the mid-thirties per barrel, I used to read of projections that $100 a barrel oil was inevitable -- and it was viewed as surely as night following day. The same thing happened with Japan and the market there -- when the Nikeii was at the 30000 level, it was rare to find anyone who could see it doing anything but continuing up. When someone commented on the excessive pe ratios that existed in the companies in Japan, the standard response was that you were dealing with the economic engine of the world which all other countries were trying to emulate -- and that such valuations were justified. I hear the same sort of specious reasoning used today to justify the valuations of some the companies that are in vogue. However, as I have said previously, just because something is over-valued it does not mean that it cannot get even more over-valued. As far as Volcker's comment about the 50 companies, I have not seen a list, but if one looks at the 50 companies with the highest market capitalization when he made the comment, I suspect most of them would make the list. I am sure that there is a web-sites somewhere that has that information.

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