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To: RocketMan who wrote (33157)	5/16/2000 11:13:00 AM
From: pater tenebrarum	Respond to of 42523

RM, you are quite right..there are sectors of the market that are undervalued relative to the big cap components sporting the lofty p/e's. to some degree the rotation you speak of is already underway. however, in order to really determine what is cheap and what isn't,one would have to make a guess about the probability of either a hard or soft landing scenario. if the former plays out, cheap stocks will get even cheaper, as earnings decline. in case of a soft landing, many stocks seem very good buys at current levels. however, leverage in the economy is extremely high, higher than ever in fact. this is why i tend to think that a hard landing is a definite possibility. this is another way of looking at the scenarios you have outlined for the market...at the moment, it must be said, the market seems to be in the process of discounting a soft landing. we know however, that the imbalances plaguing the economy are if anything increasing by leaps and bounds. can the excesses be wrung out without a recession? i frankly doubt that. now to come back to your suggestion that the current environment is more akin to the nifty fifty of the early 70's than the bubble of the 1920's, my own determination is that it's a strange mixture of both. we have elements of both eras present in the current market. how it will ultimately play out, will be determined by the course of inflation going forward. i still believe that the cyclical upturn in inflation will ultimately give way again to the secular deflationary trend. an interesting datum regarding the market psychology is the fact that the public's bullishness reached a crescendo during the first quarter that is very suspiciously looking like what you would expect at a secular top. put/call ratios and Rydex ratios fell to all time lows, and the polls like AAII had a record percentage of bulls. inflows into equity funds likewise reached record levels. in many ways it was the exact opposite of the mood that reigned at the '74 and '82 lows.