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Strategies & Market Trends : Waiting for the big Kahuna

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To: William H Huebl who wrote (23677)	8/8/1998 3:36:00 PM
From: Lucretius	Read Replies (1) of 94695

<<<Well if we DO have a REAL crash, it will be the FIRST time when interest rates are declining and most of the advisors are bearish. Even Barron's this weekend says so.>>> I don't post here often, but I felt the above statment needed some clarifying: This is simply untrue. In both the US mkt of '29 and the Japanese top of 1990, there were PLENTY of bears (central bank officials in the government were even worried in both instances--- today Alan and the boys are worried again!) and there were low interest rates. In fact those low rates are often the problem because they encourage rampant speculation and over investment which leads to overcapacity and huge amounts of debt default. Those manias just finally exhausted themselves and ended VERY badly. We are likely seeing the same exhaustion here again. Notice that mutual fund inflows (that will change to outflows VERY soon) dwindled to just several hundred million. It takes ever increasing money flow to keep this beast moving higher. This mkt has fed on billions a week for the last several months due to the inflows of foreigners (from the last figures I saw: 28 billion in the first 6 months of '98 when compare w/ 8 billion in '97 and 6 billion in '96) As this mkt is topping, the foreign money is leaving in waves. The exit door is small, when many try and flee it will be a disaster. Why ddo you thihnk foreign money historically flows to mkts when they are near tops? Just as we crashed-up over the last year despite the deteriorating fundamentals, we will crash down much faster even as analysts and economists say "everything is fine, do not flee". Remember that only twice this century has Fed warned about bloated stocks, (1929 and 1965) In both cases, HUGE declines followed. And I don't think this will be the broader mkt decline w/ the indexes holding up like they did in '65 (till '73 hit of course?) Draw your own conclusions though? -Lucretius

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