Pete, you raise some good counter arguments for
Mike to consider. However, the issue he raised about
a 50% decline should not be dismissed out-of-hand IMHO.
Just for the heck-of-it, I computed the percentage
drop from the high-to-low on the SP500 Index for
1973/1974 and 1981/1982. They are, respectively,
-48.0% and -24.1% using (high,low)'s of (119.87,62.34)
for 73/74 and (136.64,103.71) for 81/82.
Given we hit the SPX high of 986.25 last week, the
prior recessions noted above suggest that declines to
512.85 or 748.56 are not out of the realm of
possiblity. These numbers would correspond ,using
a DJIA of 8000, to DJIA levels of 4160 or 6,072.
Now I realize that picking tops or bottoms can be
very difficult.<g> But after computing these numbers
I have come to the conclusion that one should not
completely dismiss these possibilities. Why???
Well, because I am beginning to think that the
Far East situation could be as severe, and as unexpected,
a shock as of the oil embargo was that lead to the 73/74
recession. (I'm sure it is in the Far East. The verdict
is still out here in the US.) Or that the ravaging of
Far East wealth that has occurred could end up creating
an effect similar to the money supply constriction that
lead to the 81/82 recession.FWIW.
After rereading the foregoing I naturally question
my logic and the extent of my bearishness. I am not so
bearish as a 50% decline but 20% down could easily occur.
Weigh that against the upside potential from here in this
climate and Intermediate Treasuries feel warm and cozy.
I am not a "super bear", just very conservative right now.
BWDIK. |
