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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: Kirk © who wrote (4399)4/1/1998 9:22:00 AM
From: Alan Whirlwind  Read Replies (3) of 42834
 
"Is a bear lurking in the shadows?"--some contrarian points from the March 22 business section of the Denver Post:

According to the article, the market and the economy should both grow at the same rate over time. During the last 4 years the nominal gross domestic product (without an adjustment for inflation) has grown from 6.9 to 8.3 trillion. Concurrently, the market capitalization of the NYSE and the Nas. together have soared by almost that nominal GDP to 12.75 trillion.

Considering market value as a % of the economy, since 1925 the market has grown on average by approximately half the value of the economy. The market has had a disturbing tendancy to crash when the number has exceeded 70%. It is now 154%. What other market in recent times has become so overvalued? Japan, 1989.

The article also points out companies have used tricky accounting to shift costs off the books. If one takes such manipulations into account one might be looking at PE ratios of up to 45 rather than the already high 24 figure being bantered about already.

Last Thursday's USA Today Money section echoed the former. In the article "Dow's run contradicts indicators" it is reported that 1st quarter earnings estimates are the lowest in 7 years and growth for the year could be as low as 5%.

Tricorder readings suggest imminent instability. Investor to Enterprize, one to beam up. --AG
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