To: HairBall who wrote (17957 ) 6/20/1999 10:31:00 PM From: pater tenebrarum Read Replies (2) | Respond to
LG, i note in your BWDIK that you also worry about a possible blow-off developing here. in connection with this, i want to point to a remark someone(i don't remember who) made about the Nasdaq being the index truly representative of the U.S. economy, due to it's heavy weighting toward technology. assuming that to be the case, the COMPX p/e ratio is somewhere close to 100,which puts it slightly below the nikkei's at the time of it's top. so we may well be nearing the point where a catastrophe is all but assured. coming back to the nikkei, i recommend the study of a long term chart of the nikkei; the blow-off in the nikkei was an extended affair, with scarcely any corrections thrown in. from late '88 until the end of '89 it went almost straight up with only minuscule corrections along the way, and when it approached it's peak the advance accelerated in a perpendicular fashion in november and december '89. i only bring this up as an example of the extremes that a blow-off can produce. if the U.S. market enters a blow-off stage, there is no telling how far it might carry us. note also that when the end came for the nikkei's bull market, the window of opportunity to short the market was one of the smallest i have ever seen. it was as if from one day to the next everything had changed, and i doubt that many people recognized the end as such when it came. most probably thought the long overdue 'correction' had finally started, when in fact a full-blown bear market had begun without warning. there was a 'sucker's rally' from about 28,000 to 32,500 after the initial crash, which was a last chance to get out and go short - but the belief in a market that only ever goes up had been so ingrained by that time that many thought a recovery was underway. when the mania in the markets of the western world ends, i fear a similar situation will develop - the market has been rescued from the abyss so many times that most people just don't believe anymore that it can go down. and yet, a blow-off is always the beginning of the end.
