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

To: Benkea who wrote (52485)	5/29/2000 1:32:00 AM
From: UnBelievable	Respond to of 99985

The Balance of Risk While I can't say whether or not the April 17 lows will hold, my major argument with the perspective of the newsletter has to do with its major premise which seems to be that there is not much downside and much upside. I don't find the arguments for why this has to be the bottom convincing. To the extent that the value of an equity is based on the present value of future earnings, the probability that even a small percentage of the companies will justify their current stock price seems low. To the extent that stock prices are no longer based in corporate earning but rather in an irrational popular consensus of value, I find it difficult to see why the current market volatility will diminish. In that context, it seems that the risk of further declines remains high. While it may be difficult to find the bottom it is clear that one characteristic that it must have is a return to realistic levels of growth. Any bottom that we rally out of quickly will, in and of itself, be cause for the Fed, rightfully so, to take whatever action is necessary to restore stability. Four hundred points down in the next three months will be much more acceptable to the Fed, and in my opinion provide a much stronger base to build upon, than four hundred points up during the same period. It seems to me, that with the possible exception of full time traders, that over the next three months, there is a far greater risk of capital erosion through participation in the equity markets than there is potential opportunity costs associated with holding cash.