I would be surprised if we had a crash. In 1987, interest rates were three points higher than they are now. P/E ratios are similar, however, in 1999, they are skewed by some outliers such as AOL,and CISCO. This year, unlike 1987, all of the over valuation is concentrated in the frothy stuff: internet, ipo's, selected technology stocks, and concept stocks.
There is a tremendous amount of value being created from the EVERYTHING ELSE category, The "smart money" is feeling pain right now, just as they were in 1994 when the fed took the air out of the economy. That includes Southeastern Asset Mgmt, Sequoia Fund, Clipper Fund, Oakmark, and Davis Advisors. Rather than a crash, I think you start to see the "smart money" beginning to outperform from here, (even if the direction is DOWN) as well as the gradual, water torture style deterioation of the fluffy stuff.
I think the focus on "the market" is misplaced. Value investors, especially those not restricted to larger ideas, can and should do well from here. |
