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Technology Stocks : Lucent Technologies (LU)
LU 2.550+2.4%Dec 1 3:59 PM EST
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To: Jacques Tootight who wrote (2032)4/5/1998 12:02:00 AM
From: RetiredNow  Read Replies (1) of 21876
 
R.C. you got a little bit emotional with me in your post, so I'll let you know why I believe the notion of things being over and under valued is not antiquated.

The fact is that no one in this market has perfect information. That inherently means that people may bid up a stock past its market equilibrium. To make it plainer, demand outstrips supply, so there is pressure that drives the stock price higher.

Well inevitably that upward pressure eventually exhausts itself and the market tries to reassert itself. That is when the selling begins because people realize the upside potential in the near term has all but dried up. This creates downward pressure on the price.

The end result is the market seesaws up and down and up and down. That is what we call the business cycle. Some theorists like to think that information has become more perfect with the advent of the Internet and technology. These economists believe that the business cycles will be less severe.

Other theorists, namely myself, believe that just the opposite will occur. As more people get hold of more supposedly perfect information, something strange happens. People begin to react too quickly. They believe that with their superior knowledge they can more correctly predict the market. What happens is that the market begins to gyrate unpredictably. Large selloffs are followed by quick recoveries. The market is less predictable, but the speed of its ocillation becomes blinding.

The market is a rubber band. It has been pulled away from you right now, but I promise it will snap back. If you are ready, you can get out of the way so it won't hurt.
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