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Pastimes : Ask Mohan about the Market
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To: Jack Clarke who wrote (8654)11/20/1997 10:22:00 AM
From: Cynic 2005  Read Replies (2) of 18056
 
Jack, speculative excesses in the markets is like being on drugs. It is difficult to shun the habbit. The profits derived from buying earlier dips and selling in to subsequent rallies have created a cash cushion for the October dip. As far as the people who believe in buying the dips are concerned, they believe in it. But, you are old enough to know that there is one stage, late in the bull-cycle, buying the dip is absolutely the stupidest thing to do. (Well, I am wise enough to read and learn from the history. -g-) My stong belief is that we are at that stage now.
All the world events combined have created a very complex financial disarray which require some basic fundamental shifts in the economy.
1) In the event that Japan needs to sell US treasuries en-masse, the Feds may have no choice but rise the interest rates.
2) Even if the Feds don't rise (or don't have to rise) the rates, a flight to quality or concern about deflation or both could yank the yields down rapidly. A "quick" fall in interest rates is bad for the stocks and a "slow" decline is actually a positive.
3) A series of dire earnings warnings could derail the excess optimism and there is a good possibility of this happening in the very near term.

I have anticipated that this weak markets will be up (not this strong, though) and the next week to be brutally down. First 2 weeks of December ahould be massacre!

Patience is the virtue of any investor. Especially if you are short in this market!
-Mohan
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