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Strategies & Market Trends : The Millennium Crash

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To: Rarebird who wrote (156)	8/13/1997 7:43:00 PM
From: Stingray	of 5676

> If you get a tame CPI tommorrow, your gonna rally back to the highs It will be interesting to see. If the numbers are indeed tame and the market fails to react strongly I would see that as a sign of weakness. A strong rise on higher than expected numbers would be a sign of strength. Your scenario of a 10% correction followed by a final wave led by the small caps seems quite plausible to me, but so too do several alternate scenarios. 1. We have a high level of volatility with little direction for some time. This has the effect of transferring a lot of $$$ from short term players to market makers and specialists. After the short term players get driven out volume drops off, and so does the market. 2. Fear sets in. No-one ever knows exactly when or why this suddenly happens, but when it does investors who have been charting a steady course decide in the middle of the night that they would rather own cash than stock and there is nothing that anyone, including Alan Greenspan can do about it. 3. The market does not get above say 8500, the bull market is over but the dipsters prolong the agony for a while before they run out of money early next year. Sometime in 1998 it starts to dawn on Joe public that the party is indeed over and he switches some of his retirement account into bonds. The market goes down but not fast enough to make money for the Putters. I agree with you on a couple of important points - (1) the S+P 500 is overvalued and not attractive as a long term investment and (2) small caps could yet have their day in the sun. I'm more of a long term investor than a short term player and when I look around the investment universe right now Treasury notes and Bonds look about as good as anything else around, and a lot less risky. If bond yields go over 7% they will be even more attractive but that may be too much to hope for. In principle I like the idea of buying stocks but I have a hard time finding anything that for me is a compelling buy, and that includes a few small caps I've investigated. You may have better success than I do at finding some gems in the small cap sector, good luck to you if you can find them. I suspect that a couple of years from now there are going to be a lot of people scratching their heads and saying "What was I thinking - why didn't I just buy bonds in my retirement account, that way I would at least have some clue as to how much money I would have to retire on."

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