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Technology Stocks : Newbridge Networks
NN 13.98+0.9%Nov 26 3:59 PM EST
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To: pat mudge who wrote (6260)8/31/1998 2:00:00 PM
From: Doug  Read Replies (1) of 18016
 
Pat:
I looked at the 87 crash for clues. In that crash the DOW lost 33%. Conditions today are quite different from that period. The relative differences are

POSITIVES:

a: Low interest rates.
b: Near full employment
c: Low inflation
d: Strong Dollar. and good money supply.
e: Ever cheapening Commodity prices including Energy.

NEGATIVES:

a:Threat of wage Inflation if interest rates are lowered further to stimulate domestic economy
b:Threat of slowing economy due to deteriorating global markets. (5% of economy)
c:Leadership weak throughout the world and unable to solve the global crisis.
d:Massive asset inflation in U.S stocks vrs other assets.
e:Better bargains in Europe/Japan relative to the U.S

Except for negative d, the positives would have outrun the negatives and we would have had a contained correction within 10-15%. However because of negative d:, the correction is likely to be near 25%.

The DOW could reach 7200-7400. After corrections of that magnitude, the confidence of both global and U.S Investors are likely to be dampened. This generally reflects as a 2-3 mth basing period during which we should see smaller daily spreads on steady volumes. In brief , we are on our way but not there as yet.

In the social world, the weak have to bear a disproportionate share of any disaster. So too is it in the market. There are a heap of small stocks with no debt , P/E's less than 12 selling for below book value.

In a few weeks, this storm should have passed. When it does, we will gather the left overs and hope for better times.
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