Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: JDinBaltimore who wrote (34443)	11/30/1999 5:51:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

JD, i believe the strength in the Dow is merely reflective of excess liquidity still sloshing around and looking for a home. so if the tech stocks go down, we go and buy some fuddy-duddy industrials or financials. it's a pattern often remarked upon by Don Sew, constant sector rotation where one sector rises at the expense of another. obviously, the money stock, even though it is growing rapidly, is not enough to keep the market as a whole afloat, which explains why the a/d line looks so miserable. one of the effects of this is that ever greater amounts of money are concentrated in the most speculative segments of the market...ultimately exactly the well-worn recipe for disaster. one has to remember that total market cap is now at a towering 170%+ of GDP, and the ratio of market cap to total money stock is at a record high, which is why the few analysts whose critical faculties are still intact tend to point out that we need ever increasing amounts of credit to keep the bubble not only expanding, but merely where it is right now. i fully agree that technology is an area that's showing the best prospects for growth and that thus many tech stocks deserve premiums over the market multiple, but currently the overall market in the form of the S&P is already overvalued by more than 50% according to the Fed model (needless to say, also a record) and the valuations on some of the new tech darlings are clearly the most extended ever seen in any stock market in the history of mankind. in other words, to be buying into this euphoria, you need to have a lot of faith.... we have witnessed some momentous changes with the end of the cold war, the expansion of international trade and the vast technological progress of recent years, which is partly justifying higher stock valuations. however, one glance at a chart depicting money supply growth in the last decade proves beyond any reasonable doubt what the real reason behind a good part of this bubble is...one has to be naive to believe otherwise. as for AG pondering anything, i personally am convinced that the pranksters at the Fed are probably praying every day that this thing doesn't blow up on them. obviously they can't be as foolish as to believe that it won't, but they are obviously doing whatever it takes to keep the bubble alive. as the Economist has so eloquently put it, they are now trapped by it. since it is of their own making, everybody would do well to remember this when the piper finally has to be paid. regards, hb