Re: the market
Yeah, I see too much pessimism in the short term as well -
it's everywhere, including my web site. So this combined with
the end of the tax-loss selling should provide a great January
bounce. Especially the techs appear oversold temporarily.
But economists expect
a massive trade gap throughout 1998 as the Asian currencies aren't
about to bounce back to "normal" levels any time soon. In combo
with slow Asian economies, it sure looks like there will be an
"export or perish" mentality on the Pacific Rim. The multinationals
and blue chips are still very rich, and official estimates for GDP
growth are still 3% or so.
Once those cheap imports hit, there'll
be tech and blue chip earnings disappointments, and it is hard to
imagine GDP really growing at this past year's rates in the face of the strong dollar.
The Dow really has hardly budged in percentage
terms , and on an absolute level the Dow along with the S&P are both
still way up there - thanks to continued mutual fund inflows
according to news today. That the market will go up indefinitely because money is flowing in seems like a house of cards to me, though
99% of people seem to believe it true. When demographics are
driving the market rather than value, I know it's out of hand.
Not to mention good values are still rare.
Especially once the January rally is over and done with,
all those short-termers that control the Street will have
not much to look forward to for, say, 9 mos. That would strain
their brains. More downgrades. More earnings disappointments.
Etc. I think the pessimism we're seeing now is only a minor
prelude to what will happen around March and April.
The market is still above where it was when Buffett decided to
pull money out and put it in zero bonds. Just copying him
would probably be a good strategy.
Of course, this is all phooey, and the house of cards
will grow ever taller forever. After all, those 1000 people
on Wall Street that are getting $1M+ bonuses this year
are really earning it. It is awfully difficult to balance all
those cards.
One last point: does anyone know of a graph of real interest
rates? I understand that inflation is now at an annualized
rate less than 1.5%. Wouldn't that mean real rates are higher
than they were earlier this year despite the fall in the long
bond?
Good Investing,
Mike |
