David here it is
Capital Growth Topics # 258: Mania!
It is said, or so we have heard, that none may count the angels dancing on
the head of a pin. So how are we to count the e-traders dancing on top of
Yahoo!?
The plain and simple truth of the matter is that we are in the midst of a
mania, a classic mania. It is full-blown enough to eclipse any other post-
WWII mania in this country. Indeed, the only bubble we can remember of
similar proportions was Japan, and nine years later one can still hear the air
leaking out of that one.
We all seem to be in a hurry to call the top. To my mind we should instead
be focused on investing while the going is good, for a bear market will
follow this bubble, just as bear markets have followed all other bubbles we
know of. And that bear market will not be like last year's correction, with a
surge to new highs coming close on the heals of an 18% decline. No, it will
be the real thing; a rip-snorting, terror-inducing panic that will cover time
and price in size.
By the time the bear market is over the few remaining brokers will be
lonely. Blue-chip stocks will go begging at huge yields. No one will want to
invest in anything. Volume will be nil. The NYSE's new building will be
seen as a folly. There will be no SOSE bandits to carp about. The two or
three market makers left in business will be very good at crossword puzzles.
You will be glad there are specialists, as there will be someone to trade
with. Your order desk will thank you for your order. No one will be talking
about investing part of the social security fund in stocks. In short, the bear
market will have served its proper function, not only eliminating the
excesses, but preparing the way for the next bull market by making a clean
sweep of the markets. Oh, we almost forgot; there will be no place to hide.
Indeed, few of today's market participants will be left to play again after
the
bear has finished. Those that are, will have newfound respect for the
markets. Watch closely, you are witnessing a very rare event, a bubble of
mammoth proportions. You'll be able to tell you grandkids about this one,
that is if they haven't lynched you for losing the family fortune.
But that's then, and this is now, so invest we must for the rainy day.
John Bollinger, CFA, CMT
15 January 1999
Entire contents copyright 1999.
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******************
ABOUT JOHN BOLLINGER
JOHN BOLLINGER, CFA, CMT is best known for his ten years as Financial News
Network's Chief Market Analyst and for his market commentary on CNBC. He has
published the Capital Growth Letter since 1988 and is President of Bollinger
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