LT, I have been reading with interest your prediction of the market demise. You may be right, who knows?
I submit that history is history and what has passed has passed. I never try to predict the future using the past as a rule. Of course there are things to be learned from the past, but the future is being invented every moment.
All the old relationships of ratios and interactions between various market indicators and measurements are history. They will not, necessarily, predict the future. Who says that gold going up still means inflation is coming? Who says even that PE's are a valid way to guage the value of any stock from this day on? Does history define what are "acceptable" financial ratios?
Just as society changes every minute, so does the "consious" of our financial markets. The juxtaposition of "stocks" as an element of American society has advanced to a heretofore unknown commonality with the general population. So fo course there is more Park Avenue exposure to markets and stocks. The markets are no longer the domain of the elite -- stocks are consumer items and therefore marketed as many other consumer items.
So in such a new environment who is to say what ratios, relationships and measurements are valid. No one, no one, no one. It is a brave new world my friend. Do not rely on on an old map of Texas to plot your course for Oklahoma...for Oklahoma was once part of Texas so you would never get there.
My feeling is we have embarked on a new era in financial matters. In this new order, there are are three critical points which must be considered and understood.
1. Money will continue to flow to the stock market. We are in the early part of the largest transfer of wealth on an intergenerational basis on a scale never before witnessed.
2. Crowd and market psycology. In the age of instant everything, the power of the herd is monumental. Forget PE's, study the market "psyche".
3. Companies that have, or are establishing, strong franchises, and that actually make money, lots of money, are the stocks to own. We must filter out the daily clutter of rockets and torpedos.
Don't be trapped in to using yesterday's tools to solve today's and tommorrow's problems. However difficult it may be to accept, things are NOT the way they once were. Capitalism's only constant is change.
Remember not so long ago when 200,000,000 shares traded in one day on the big board was headline news? That was considered a heavy volume day. Now it would be a very light day. In ten years we may say...remember the old days in 1998 when we thought a PE ratio of 100 was high?....stranger things have happened, hell, Clinton was elected TWICE.
That's the Mayor's take on the "big picture".
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