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: Michael Watkins who wrote (46435)	4/15/2000 3:37:00 AM
From: Jacob Snyder	Read Replies (2) \| Respond to of 99985

re: Asset inflation is the issue; irrational pricing is the issue Exactly correct. Over the (very) long-term, the S&P 500 stays within a PE range of 10-20, using trailing earnings. Earlier this year, it hit an all-time high PE of 30. If the PE had been, say, 15, when inflation nudged up a bit, you would see a little bit of PE compression. But from a height of 30, there is lots of room for a big fall in the PE. And that PE of 30 was an average of a few stocks with PEs of 50-150, and a lot of stocks with PEs of 10-30. But, back in January, it was very hard to get people investing in Ebay to talk about PE ratios.

To: Michael Watkins who wrote (46435)	4/15/2000 7:07:00 AM
From: Crimson Ghost	Respond to of 99985

A most insightful post! As long as most see this as just another buying opportunity, the bear will continue. There will be bounces -- perhaps strong ones -- but until people come to believe that the market will not be coming back anytime soon -- the major downtrend will continue IMHO This generation of investors still has to learn the lesson that REAL bears do not end until hope is crushed and valuations are reasonable. We might get a bottom when most of the "elves" are neutral to bearish.

To: Michael Watkins who wrote (46435)	4/15/2000 12:52:00 PM
From: American Spirit	Read Replies (4) \| Respond to of 99985

Failed rallies yesterday don't mean rallies next week will fail. In fact to the contrary. You had seven big factors going against us Friday which will be less of a concern in coming days, those are bigger than usual TAX BILLS to pay, negative MEDIA COVERAGE, MARGIN CALLS from a five day slide, PANIC selling, PROGRAM selling, a fairly negative INFLATION REPORT report the same day and the fact that it was FRIDAY, many not wanting to hold through the weekend. All combined it caused selling into the rallies. Preservation of cash being king in an atmosphere of fear. Some negativity could certainly linger but these concerns should subside in coming days, then there will be reasons for a sharp upturn, those are PANIC OVER, more positive or neutral MEDIA COVERAGE, no more bubble prices in former high-fliers, LOW PE's, prices and market caps, generally positive EARNINGS, TAX DAY over, MARGIN CALLS finished and massive SHORT COVERING which actually started at very end of day Friday. Most of the inflation has been caused by oil prices which are now subsiding a bit. The cost of gasoline here in LA peaked about three weeks ago and has come down about 10%. End of day Abby Joseph Cohen basically said, "Okay now that prices are down we like stocks again". That kind of change of opinion/upgrading the market will continue now. In fact many top tech names now qualify as bona fide value stocks at these low prices, at least comparing current PE's against near future earnings growth. UIS at 13 PE, COMS at 16 PE, IBM at 25 PE, etc. In short, overvaluation has greatly diminished in the market. Once that message gets out and buying begins the shock of last week will gradually wane. Going out now to find Barrons and see what they're writing. The media message will play a big part in any recovery prospects, as will statements from government, market and Fed officials. One thing I know is that whomever buys at the bottom will make a lot of money maybe very quickly. Because sooner or later the rallies will hold and a bottom will be confirmed. From there we should bounce dramatically. Within a few days it will be much more dangerous to be short thwn long th market. Maybe even by sometime on Monday. Last year the market rallied on tax day. It happens.