Hi Tom,
and thanks again for your perspective. A healthy debate allows people to make informed and rational decisions and nobody wants to be on the sidelines for another 2-3000 dow points like the bears of 94, 95, 96.
All cycles must end sometime and this time has the 'feel' to me. I'm sitting on the sidelines for a while and watching and placing some small bets on the downside. There just doesn't seem any margin for error here. The (we) boomers screwed up the 70's with disco & inflation, the 80's real estate market, now they're screwin up the 90's stock market. Those cycles ended, so will this one, but timing this thing may be elusive.
>>>We also have an absence of frothiness--we had that in April/May 1996. Most bull markets see a marked amount of speculation in the third and fourth tier stocks before they come to an end.<<<<<
I disagree here, there have been bouts of speculative excess over the last 2 years and right up to today, in 95/96 it was the semi's, in 96/97 it was the networkers, in 97 it was Y2K. How about Bre-x, how about the little energy company Harken Energy, trading 6M shares a day on AMEX a couple of weeks ago on a RUMOUR of big oil discovery in Columbia, read the HEC thread to see people in the throes of speculative euphoria. How about Gateway 2000, which was slightly nipped 5 points after a earnings warning and was bid back up 3 points the next morning on the PROMISE (speculation) that sales will rebound in the fourth quarter (I think this stock would have been hammered 10 points and taken time to recover in any other time period of the last couple of years). You could make quite a laundry list of fallen heroes.
What about the popularity of options, everybody wants to learn to play options. What leverage! You are speculating on the movement of a stock in a short time frame - all we need is Wayne Newton and the experience would be complete.
You commented on the large number of posts here generated after Bill's beep and all the people buying July puts - speculative euphoria, irrational exhuberence to the down side.
Normal rational people who would not have ever thought of putting their money anywhere but in a nice govt insured safe CD seven years ago are throwing money at stocks/options, like there is no tomorrow (I'm guilty as anyone here).
Frothiness is not recognizable because it has become a matter of fact daily occurrence, momentum is just a way of life, just like (yawn), oh another 100 dow points or (yawn) oh another 1000 dow points. This kind of behavior only occurs during 'speculative episodes' as described by J.K. Galbraith in "A Short History of Financial Euphoria".
I see a lot of money managers interviewed on TV and when asked about the condition of the market they give the company line about low inflation, reasonable growth, corporate profits, mutual fund money, worldwide capitalism, but lately I see some of them say this nervously and with less conviction. Harvey Eisen on WSW, Friday, commented that of all six times in the past when the S&P rose 20%+ two years in a row it was lower the 3rd year. When Louis asked him if he had become a bear, he said no, because they handed him his head when he went from bullish to neutral.
Why? cause the path of least resistance is up! I'll bet there are lots of closet bears out there. It's not easy starin the bull in the face, try to give this speal to some of your friends, they look at you like you've been abducted by aliens and re-introduced into society. (actually everyone on this thread reports to the big giant head on a daily basis) ggg
sorry for the long post Tom and I welcome any rebuttal!
regards, bob
PS: Bill would you mind sending me those charts.
Thanks for all your work and taking time to share it with others |
