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Strategies & Market Trends : Waiting for the big Kahuna

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To: James F. Hopkins who wrote (24161)	8/13/1998 9:42:00 AM
From: Philipp	Read Replies (1) of 94695

Hi Jim: My God don't talk 7000, I'm convinced if she does that we could go to the toilet every bit as bad as Asia. I don't agree. 7000 is not a meltdown, it would be a mild correction. I think the market has to fall significantly below 5000 and stay at such a low level to be even comparable to the Asian situation. Remember in the 87 correction the stock market fell by almost 40 % (intraday); this did not cause a very severe downturn in the economy. In fact, the main mistake politicians and bankers around the world made was to relax monetary policy too much, which caused high inflation and high interest rates subsequently (and eventually very severe recessions around the Western world). At 7000 the market is still highly overvalued by historical standards. Indeed I would argue that a steady decline to that level would be much healthier long-term for the economy than the present overblown expectations (you call it hope, Greenspan calls it "irrational exuberance"). I agree with you that when this market goes down it is unlikely to stop at 7000 and will fall much/much further, but it all depends on how quickly it will recover. It would have been much better if the Fed had pricked this bubble a long time ago because then any correction would have been much less severe than what is bound to happen within the next few months/half year (or as early as next week). I hope that you have taken precautions for this possibility. Good trading to you and everyone else. Cheers, Phil P.S.: I am expecting a "head fake" for today.

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