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Strategies & Market Trends : Galapagos Islands
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To: Lizzie Tudor who wrote (15218)12/4/2002 3:02:37 AM
From: lurqer  Read Replies (2) of 57110
 
multiples need to contract throughout the secular bear

Well like many things it depends upon your definition of secular bear. If your definition is the price (and valuation) plunge from a mania peak to the low P/E in the 7 to 10 range, then yes multiples contract. However, if your definition of a secular bear is the period from a mania peak to the start of the next secular bull, then the valuation plunge is merely the first part of the secular bear. I believe you'll find that 15+ year secular bear markets fall under the second definition. Consider

zealllc.com

Note that in the Great Depression, valuations never got as low again as they were in '32. In the '66 to '82 bear, the plunge carried valuations to a low in '74. I'm convinced that the only reason that valuations slid to an even lower low in the '77 to '82 period, is because of the economic devastation caused by the double digit inflation of that period. And even then the '77 to '82 slide was mild compared to the valuation plunge from '66 to '74. While I believe that our valuation plunge will be over in '08, for good demographic reasons, I suspect that the next secular bull won't begin until a full decade later.

That in no way means that technological innovation will cease. I recall building my first CPM micro computer in a friend's garage in the '70s in the teeth of the last secular bear.

lurqer
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