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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 683.34+0.2%Nov 3 4:00 PM EST
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To: Jacob Snyder who wrote (38427)1/28/2000 5:47:00 PM
From: pater tenebrarum  Read Replies (2) of 99985
 
Jacob, the mania in the internet stocks and other sectors that have no earnings contradict your statement somewhat. it's also contradicted by the fact that stock prices have in recent years risen MUCH faster than earnings. yes, the direction of earnings was the same - namely up. and for the most part, interest rates have trended down. and yet, how does that explain that stock prices have increased ten-fold in the tech sector while earnings have merely doubled? how do you explain a 200 p/e on the NAZ? it can not be explained by fundamentals. just as in the previous disinflationary boom period in the 1920's, the stock market is pricing in decades of growth in one euphoric moment. emotions and the money supply move stock prices. the rest is just attempts at rationalization.
there simply is no fundamental reason for stock prices to be where they are...based on fundamentals alone, stocks should be about 70% cheaper.
that is also the reason why most people will be shocked how far stocks can fall when a REAL bear market hits as opposed to the corrections of the past few years.
we all know that a secular bull market began in '74 or '82 according to preference. well, the next big thing to come will be a secular bear market. i don't claim to know when exactly it will begin, but i know it will be just as painful as the secular bull was gainful.
it will not bring stocks to their real fundamental value, but BELOW it. because of the main driver of stock prices: emotion.
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