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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Matthew L. Jones who wrote (26107)	9/16/1999 5:37:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

Matt, i basically agree, though i'm not so sure that we really need a ten-day rally. also, we cannot be certain at this point whether the bull market will resume after a 10% correction. i know we haven't had a bear market for a long time and Glassman says stocks are undervalued<g>, but i for one would not rule the possibility of a bear market out a priori. the often re-iterated bullish argument that the economy is doing just fine doesn't count in that context - no bear market has ever started when the economy wasn't doing fine. the biggest problem posed by the current economic expansion is precisely the fact that it has gone on so long. in a more old-fashioned boom and bust cycle, excesses are regularly corrected in the 'bust' phase. when no recession is allowed to occur for a long time, excesses go unchecked, which is why we have a credit and asset bubble, coupled with record high current account deficits. in such an environment, misallocation of resources eventually proliferates, as do fraud and manipulation. this remains largely unnoticed, as long as most people are happy with the status quo,i.e. as long as money is easy and stock prices keep on going up. as time goes on however, the imbalances become ever more noticeable and pronounced, until one day, often for a seemingly unimportant event or piece of data, one prop of the collective happiness suddenly disappears. then all the elements that have driven the boom and led to the accumulation of excesses begin to work in reverse and serve to unnecessarily prolong and deepen the adjustment period that follows. that of course, is the stuff of protracted bear markets. Ludwig van Mises had some interesting things to say about that, and i believe he was right. Japan is living (well barely<g>) proof of that. regards, hb