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To: Eric Wells who wrote (73799)	8/14/1999 3:11:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

Falling stocks bring out Ministers of Paranoia By Pierre Belec NEW YORK (Reuters) - The stock market's headline-grabbing slide has once again brought out the Wall Street Ministers of Paranoia. After nearly five years of spectacular gains, Wall Streeters are starting to wonder about the durability of the bull market. Things have apparently changed a lot since the Federal Reserve hinted that it may raise interest rates later this month in a bid to keep inflation from resurfacing in the economy. What's unsettling for the market is that history has shown that whenever investors are in that frame of mind, it's usually a good sign that caution is warranted. The Dow Jones industrial average, the Nasdaq Composite index and the Standard & Poor's 500 index have been locked in a slow moving but steady erosion since setting record highs in July. Some analysts see trouble in the way the market is behaving. The daily trading volumes have shrunk, which suggests that investors' appetite for risk is low. They are not running back to snatch bargains in the wreckage of battered stocks. The light volumes have also caused stocks to fluctuate wildly. The ratio of stocks that fall vs. those that rise has increased sharply, which is a no-no for the market. Also, a bigger number of stocks are making new 52-week lows. There's more bad news. Internet stocks -- the former shooting stars -- have had their own private crash. Some 90 percent of the Internet shares that were launched in initial public offerings in July are now trading below the level at which they made their debut on the Street. What a difference a couple of months makes. Just last April, during the Internet mania, the stocks would double and triple after an IPO. Now, people view many of the Internets as Lemmings.Com. Even the blue-chip Internet stocks, such as America Online <AOL.N> and Amazon.com <AMZN.O> have fallen precipitously from their peaks. The slaughter of Internet stocks has brought the technology-laced Nasdaq Composite index down 10 percent from its July high of 2,864.48, which fits the definition of a correction. Another 10 percent plunge could signal the start of a bear market. The Dow is down 3 percent from its peak of 11,209.84 and the Standard & Poor's 500 index has fallen 7 percent from its high of 1,418.78 . TheStreet Com's <.DOT > index of the leading Internet companies has plummeted 40 percent from its April high. "I'm more pessimistic than ever about this market and, in fact, I'm sort of scared about what could happen," said Raymond DeVoe Jr., market strategist for Legg Mason, Wood Walker. "Back in the 1929 crash, just 2 million people were in the market but now, half of American households own stocks." He said a bear market is a mental process rather than a statistic and the risk is that investors can quickly push the panic button if their losses are too large. "I'll bet that if the market drops 20 percent and stays there for more than a week, I'll guarantee we will see a lot of dumping by people and it could mean a drop of 40 percent or more," he said. "Investors can lose 10 to 20 percent but they'll still stay in the market. But if they lose 40 or 50 percent of their holdings, they'll be out of the market completely," DeVoe said. Right now, few investors are running for the exits. The reason: Investors have made so much money in the market over the years, they now believe they could easily ride out a big market slump. "To those people, I would say: 'That's what you're saying now, but let's wait and see what you will do when it does happen,'" DeVoe said. "It's easy to talk bravely with the market having acted beautifully for the last 17 years." What are the tricks to staying alive in a bear market?. "The 'buy on dips' mantra that has worked in the past becomes 'sell on the rallies,' because that may be the only time there is liquidity to get out of the market," he said. ...