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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (912)	4/12/2000 10:40:00 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

2 thought provolking posts from Barron's MKT Watch: The Global Market Strategist P.O. Box 5309, Gainesville, Ga. 30504 MARCH 30 ~ Seasonally, the top is forming for the tech sector, and the 39-month cycle still looms ahead in October. Bonds continue to rally because of the still-inverting yield curve, while the Fed continues to tighten. Strong economic data suggest the Fed is not done yet, and Treasury-market participants are pricing in more rate hikes. The U.S. dollar has reached new multi-year highs against the euro, but is close to reversing that trend as much of its strength is tied to the strength of the stock market. Gold's fall to new lows for the year did not break key support levels. Gold has likely bottomed its 20-year bear market and is basing for its next advance. -DAN ASCANI Korty Research 102 White Oaks Lane, Carmel Valley, Calif. 93924 MARCH ~ The value of stocks can be estimated using present-value formulas based on long-term forecasts. However, the reliability of forecasts falls with the length of the forecast. This uncertainty is one reason stock valuations can change dramatically, as they have since 1994. The S&P 500 Price Index has increased 209% while dividends increased only 28%; the price/dividend ratio increased 142%. Capital gains, which averaged 25.4%, per year, would have been only 5% without increased valuation. Valuations were already high in 1994 so that this increase has created an unprecedented situation. The change in valuation created capital gains which have nothing to do with the normal returns to equity ownership. But people have begun to see the returns due to valuation change as normal. The gains encourage people to buy stocks at even higher valuations, thus creating more "abnormal" capital gains-a self-fulfilling prophecy. The more extreme the valuation changes, the more disappointing the normal returns will be once the positive valuation changes stop. The process then reverses. In the market cycle of 1970-74, almost all of the price movements in both directions were due to valuation change. -DOUG KORTY