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Strategies & Market Trends : MDA - Market Direction Analysis

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To: Les H who wrote (34034)	11/23/1999 11:07:00 AM
From: pater tenebrarum	Read Replies (1) of 99985

Les, here, yes. imo the perma bulls make the mistake to view the sometimes slightly bearish slant of MDA as an ever-present trait that means we're all perma bears... to me it's only natural to have an overall slightly cautious view when dealing with the most overvalued market of all time. of course valuation per se is not useful for timing short term moves, and even for the longer term has to be seen in the context of interest rates, profit growth, etc. so looking back, i'd say that a certain amount of the market's advance can be justified in the overall fundamental context. however, we should never lose sight of the fact that multiple expansion accounts for a great deal of the advance and that's a direct result of the Fed's loose monetary policy. one could argue that the Fed will continue this policy thus allowing the bubble to continue to expand...that's true to a certain extent, but i suspect that some kind of 'natural' limit to this process will be reached soon. either inflation will finally pick up, or lenders capacity for taking on new borrowings will be exhausted. i wouldn't entirely dismiss claims that equities are accorded less of a risk premium in modern times...but even so valuations look more than stretched. sorry for ranting.... regards, hb

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