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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: pater tenebrarum who wrote (42253)	11/30/2000 1:25:20 AM
From: Perspective	Read Replies (5) \| Respond to of 436258

Thanks for the reminders. I keep trying to remind everyone of this as well. I've come to trust many on this thread, and we are skeptical by nature. When we collectively become skeptical of our own ideas, it weakens my trading position. When I develop insecurity, I know I must take profits, else I will take losses at the first sign of trouble. It's kind of a confidence stop-loss. The long-term trend here is huge. My most likely scenario now is a decade much like Japan's, so I've been studying their troubles more. It is interesting to note that their second rally phase - what I'd call wave four of the decline - consisted of two sharp, quick short-covering rallies following an extended bottom. Allan, if you're reading this, you may want to take another look at that bottom. I consider a Nikkei-like pattern to be pretty much a best-case scenario as far as the Naz is concerned, given the unprecedented nature of the blowoff that put us in this position. Even that had an extended bottom formation period lasting weeks. The ingredients that produced the sharp rallies on our first leg down are NOT present any longer; the $25B/month fund inflows have been exhausted. I'm not sure how long the inflows from a handful of short-sellers can deliver against the redemption flow demanded by mutual funds. I don't mean to promote arrogance or greed, but we must review history for examples of how bubbles have self-destructed. Those examples argue for virtually a short-and-hold strategy. Because I am not 100% certain that our self-destruct sequence will follow those of previous secular bears, I am gradually lightening up on the net short position. But that basically means not fully replacing short positions as the prices of the underlying securities decline, only partially refilling the positions. I, too, am not ruling out the possibility of a 1929-34 style wipeout. I know we think we are far more clever than our predecessors, but I think that may amount to nothing more than supreme arrogance. Our great-grandfathers fathers weren't idiots; they didn't produce the Depression because they wanted to. The excesses in the stock market of their day provide a snapshot for the psychological state of the financial system at that instant when the unthinkable began. Our own Nasdaq at the beginning of the year is likewise a snapshot of the unprecedented lunacy that prevailed at that instant. Our own confidence in the present day systems and the huge technological advances that have occured in the interim suggest that we won't have to worry about selling apples on street corners to survive. However, the relative damage to the equities markets could be nearly as bad, or maybe even worse. We certainly jumped off the high dive on this one. The explosion of debt and erosion of risk premiums in securities is unprecedented, and the full effects of transferring and disguising risk in the credit markets have never been tested in a recession. My message: brace for a difficult two years, and don't worry too much about the noise on the signal. Don't be a clown - don't abuse leverage, and keep an open mind to changes in the scenario. Play the percentages, and begin nibbling at the first sign of "value" or growth-at-a-reasonable-price. My long-term target for "completion" of this bear market is 1700 on Naz, around March, 2002, with a sequence of equal or slightly lower lows in 2006 and 2010. Why? Because secular bears have usually lasted that long and dropped similar amounts, and left financial hangovers that lasted for years. However, if the liquidity trap really is set, Naz could drop below 1000 by 2002, setting the ultimate low in place "immediately". BC