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Strategies & Market Trends : Stock Attack II - A Complete Analysis
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To: Terry Whitman who wrote (3603)3/21/2001 9:12:21 AM
From: AllansAlias  Read Replies (1) of 52237
 
IMHO, the problem with that Yardeni model everyone keeps referring to, is that it only goes back to 1994.

The initial chart only goes back to 1998 and is based on consensus estimates. Well, when was the last time that consensus estimates were ever right at the top? I doubt gravely they will be correct on the way down.

If we can agree, finally, that we are in a bear market, then we can expect it to last 4.5 to 6 years -- an estimate used by non-bears as well. (The nastier bears on the other hand might say that this assumes that this is not the more rare systemic adjustment that could last 2 or 3 times that long.) The size of the preceding bull, both in time and range, has been an important clue in the past to the time and range of the bear that follows.

Secular bears end when stock prices are at undervalued extremes. One can not trust data that only goes back 7 years from a manic top to get a handle on what "extreme" means. I am not saying that we should be ready for all stocks to return to fair book value (although I think a case can be made for previous decent bears approaching this measure), but I think one has to keep an open mind about the possible consequences of coming off the greatest bubble in modern history.

It's going to be a very interesting and challenging few years for sure.
Cheers.
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