Hi Carl,
thank you for interesting reply (This thread is very knowledgeable, and the participants articulate themselves well IMHO)
You are quite right, the smart money is the first to exit and the small investors get left holding the can, that's how it always works.
You repeatedly use the word "Recession", and I think this is the wrong word. The economic fundamentals do not indicate this. I think "Correction" is the word we should be using. Recessions are "slid into", corrections tend to be abrupt.
My take on the situation is that the current situation is unique.
We have all the major markets in US and Europe near their all time highs, which alone causes jitters.
We have a major turmoil going on in Asia. The effect of this is to reduce the price of imports and the price of off shore manufacturing (both good): One of the down side is that many companies, in the high tech area in particular, are substantially reliant on Asia for revenue and profit.
This leads to reduced earnings. However due to fresh money , over confidence or whatever, the prices have not reduced accordingly, which leads to high P/E's (and hence more jitters)
We should not generalise either. Semicon releated and computer peripheral stocks have for many years been 2 of the major drivers behind the NASDAQ. Would you claim that their P/E's are out of sync, and are due for a correction?
What is out of sync is the newly evolved Internet sector. I need not real off the list of well known names, but for many of them we cannot talk in terms of P/E as they have yet to show a profit.
" Thus interest rates do provide a good investment alternative even at the current time, and I believe that given fear, investors may well prefer less return"
You are quite correct, but this is hind sight. This lesson has to be learned by experience before it is believed.
Sure a correction is coming, they always do. Allow me to be provocative: If Japan would get itself together, the DOW would correct to 10.000+, and the NASDAQ ???
Regards
Alan |
