Victor, a very short question which I cannot answer so shortly. It comes from a combination of many tenets. The first disagree with your tenet (few posts later), that because the number of shares is constant the price goes up. The quantity of gold produced every year is smaller than its end use, yet it goes nowhere (CB have more than 10 years production on their hands), similarly there is an increasing supply of stock. Currently there is indeed excess liquidity, but when that dries up (and it often dries up) comparative valuations starts a process of funds reallocation. In any event, my statement is based on the tenet (unproven) that over an extended period in the coming years, stocks will be stuck in a wide trading range of about 5000 to 10,000 on the Dow, in parallel to a similar extended period between 1966 and 1982, and a similar extended period at the beginning of the century when the same DOW was stock between 50 and 100 (very roughly). I do not think that on this correction we will get a real bear market (mostly because excess liquidity does not disapear over night), but I think that a major retrenchment lead by the leaders of the recent rally (tech's) will lead the way down (note that the while the BTB of the semi equip. for instance is actually stagnating and for the last three months shipments have started (what I believe is) a counter trend down turn. I think that your liquidity argument will reestablish itself later in the year but will again be repelled later on, possibly when we finally succumb to the world wide recession and have a little slow down of our own in the second half of 2000.
This is getting already too long for such a short query (VBG).
Zeev |
