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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: stock bull who wrote (8184)10/5/1998 5:44:00 PM
From: Wren  Read Replies (1) of 42834
 
Re effect of international situation on BB bullish forecast

I have no idea how BB's model factors in international trade, etc.

Personally I believe that we are in for some rough sledding and sold most of my international stocks some weeks ago as well as reduced my US equities.

I have believed the P/Es were too high on a lot of stocks for some time. In the March 30th issue of Barrons, there was an article entitled Exactly How Nifty. This revisited the 1972 Nifty Fifty showing the P/Es in 1972 and the annualized return thru 1996 on those stocks. Those 50 stocks had an average P/E of 41.9 in 1972 and an average annualized return from 1972 through 1996 of 12.7%, which is not bad for that time period. The S&P returned 12.9% during those years.

I noticed something interesting as I studied the table. Only one of the twelve top 72-96 performing of those Nifty Fifty companies had a 1972 P/E above the 41.9 average. Only one of the twelve poorest 72-96 performing of those Nifty Fifty companies had a 1972 P/E below the 41.9 average. This is an argument of holding the high P/E stocks at a market bubble top.

I thought this was significant and begin to reduce my equity exposure.

I am very interested in when to begin to buy back in. That is the reason I try to hear BB's opening remarks each Saturday. I also look at other sites, such as the Princeton Economics site, which factor in the international situation in a big way. Because of the international situation, PE believes we are in for a re-play of the 73/74 bear market with a drop lasting a number of months like happened then.
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