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Unfortunately, I think few people today have sufficient experience to intelligently discuss your question. I see no mention of the "Nifty 50" - those excellent stocks you were supposed to be able to buy and forget, back in 1960. Probably few can recall GE selling for a pe of 4 - or even further back, when it sold for $2. Past times when stock holders were too enthusiastic, or too depressed. Of course, bad times will come again, sometime. Biotechs are less bubbly right now than other parts of the market, and likely all would agree that hot stocks will fall further than those which are merely warm. Who knows when this will happen? I was convinced that the dip before the most recent one was meaningless. And it was. But I was heavy in cash, awaiting (in error) this blip that lasted all last week end. We have a problem of interpretation - with steady currency, falling national debt, low interest, little inflation, and a flood of propaganda that all these things will ever continue, for we are highly competitive in international trade, and trade deficits matter not. Well, gee there is much truth in what is said. It sounds damned convincing. It truly could go on for years. Trade barriers have lowered, and third world countries are finding jobs for their citizens who now have some money to buy our products. This really is an age that, comparatively, is golden. You can bet that something will change. It all will tumble down, eventually. But when? I don't know. Stocks are overvalued, and certainly a 10 to 15% correction should cause no great concern, I think. We have seen the strange phenomena by which "rotating corrections" squeezes excess out of this or that sector of the market while generally the market undergoes no general change, and little notice is taken that a correction has occurred. My concern - for lack of better direction, perhaps - centers upon mutual funds. So much investment has flowed there from relatively unsophisticated investors. With the Dow at 6500, a 1000 point drop is within a realm that could be considered a "normal" correction, even tho it sounds steep. But that would be scarey, and many would likely want to draw their funds out. In that time of nervousness, I don't know where enough fund stocks could be sold to raise money to repay withdrawals - I could easily see a self feeding frenzy of panic develop from facts which justify no panic. Only those who run the funds have to really worry about "who will buy our stocks". Trades are made between willing buyers and sellers, and we simply assume that someone always will be on the other side, willing to make our transaction. I think those are the sort of concerns you allude to, and I have no answer for them. |
