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Strategies & Market Trends : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (2770)	6/25/1999 2:29:00 PM
From: Dr. Jeff	Respond to of 3339

Well, we all know what happens when "reports" like that come out. WE RALLY TO NEW HIGHS! TIME TO GO LONG!

To: RockyBalboa who wrote (2770)	7/4/1999 3:25:00 PM
From: Giordano Bruno	Read Replies (1) \| Respond to of 3339

July 4, 1999 Investors Unsure How High Is Up By The Associated Press NEW YORK (AP) -- Almost 17 years after the start of one of the mightiest bull markets in financial history, investors are still faced with the stubborn question ''How high is too high?'' The Wall Street boom traces it origins to August 1982, when the Dow Jones industrial average began to climb from a low point of 777. Just a few months later, when the average surged past its previous closing peak of 1,052, set a decade before in January 1973, analysts began to fret that it had climbed too far, too fast, and had moved into dangerous ''overvalued'' territory. With few interruptions, they've been worrying about the same issue ever since. The intensity of the debate reached a new level in December 1996, more than 2 1/2 years ago, when chairman Alan Greenspan of the Federal Reserve Board first voiced his concern over ''irrational exuberance'' in the market. But that didn't slow the bull's progress in the slightest. The Dow, which stood in the mid-6,000s at the time of Greenspan's first warning, went on to soar past 11,000 this year. Presumably, Greenspan and other Fed policymakers had concern about inflating prices of financial assets very much in mind when they acted last week to nudge short-term interest rates higher. But once stock-market participants have decided on a way of looking at things, it's not easy to change their attitude. On Thursday, the day of the Fed's restraining action, stock prices jumped ahead and the rally continued Friday with new record highs in several indexes including the Dow, which closed at 11,139.24. Thus, even after a round of credit-tightening, the model used by the Fed to gauge the level of the stock market remains ''grossly overvalued,'' in the words of Edward Yardeni, chief economist at the investment firm of Deutsche Banc Alex. Brown. ''I see a great deal of risk,'' he says. Steadfast bulls may take some perverse reassurance from talk like this. In keeping with the ancient adage, ''bull markets climb a wall of worry,'' stocks have seemed impervious to charges of overvaluation all through the 1990s. Nevertheless, everybody who owns stock investments these days has to operate under the financial equivalent of a continuous tornado watch. It stands to reason, analysts say, that stock prices can't keep rising at double-digit rates each year indefinitely unless corporate earnings can grow at the same pace, or pretty close. ''No asset can outrun its own fundamentals forever,'' says Timothy Vick in his newsletter Today's Value Investor, based in Hammond, Ind. ''Over long periods, the market value of a company's stock cannot outstrip its own internal growth rates by very much. ''Sure, technological gains can cause improvements in corporate efficiency and lead to temporary quantum leaps in earnings. But the competitive, cyclical natures of markets help maintain the direct relationship between sales, earnings and valuation.'' The last word comes from Eric Miller at Donaldson, Lufkin & Jenrette Securities Corp.: ''Forecasts a decade ago for the 1990s tended to have a common theme, that it was going to be a lean decade. ''What was thought to have been years of greed and excess in the 1980s was sure to be followed by relative austerity and less selfish behavior.'' Instead, the great expansion has only gained momentum. ''Maybe this grand era can be extended for some time,'' Miller concludes, ''but one requirement, in our view, is that too many people better not kid themselves. We worry that some investors are engaging in 'irrational rationalization,' and that their expectations are vulnerable.''