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

To: theniteowl who wrote (63593)	12/3/2000 1:22:35 PM
From: KymarFye	Read Replies (2) \| Respond to of 99985

At bearish turning points and in bearish periods, as thoughtfully pointed out on the "contraryinvestor" page, pessimistic views often become as exaggerated as optimistic ones become during bullish periods. (Anyone here remember, for instance, THE LIMITS TO GROWTH and THE END OF AFFLUENCE?) In many, if not most, if not all instances, arguments sooner or later revert to prejudicial rehearsals of the same basic positions - that things are different, that they are essentially the same, or that (as seems more more likely to me) they are different in important respects and essentially the same in other important respects. The discussion in "Clinging to Hope" of "Dollar Trading Volume" (DTV) is illustrative. The claim (similar to a position advanced by Alan Abelson in BARRON'S) that the contemporary ratio of DTV to GDP is directly comparable to the level that was reached during the Roaring '20s may, after all other issues are taken into account, be significant, but it may also neglect 1) the massive securitization of previously untraded and untradable assets, 2) the likewise massive overall increase in investment participation from multiple sources, 3) the likewise massive overall increase in the velocity and ease of trading. Even setting aside the possibility that the absolute growth and structural maturation of the economy in other regards may have skewed the underlying relationships by orders of magnitude, a much smaller portion of the total economy was publically tradable (or arguably even measurable) in 1929. Whole economic sectors, including some that didn't even exist in any meaningful way in 1929, or even in 1959 or 1979, are now part of those DTV figures, and not just as newly securitized assets (e.g., REITs), but also as represented in multiplicitous overlapping trading vehicles and transactions. In addition, returning to the previous point, major new actors (such as mutual and pension funds, foreign and multi-national investors, etc., etc.) have arisen, even as the sheer actuarial capacity of the system has expanded immeasurably, allowing capital to flow exponentially faster and further. For these reasons, the most remarkable aspect of the DTV chart might not be the superficial similarities between now and 1929, but rather the exaggeratedly depressed levels from the '60s to the '80s in conjunction with a subsequent rise that happens to correspond to real innovation (not "theoretical innovation") in transaction technologies (computerized electronic systems, including but hardly limited to the ones most of us are now using); accelerated globalization; and minor little events like the fall of Communism and the rise of East Asian economies (among others). None of this is to say that today's markets are immune to upset and disaster, even to parallel disasters, but, all the same, comparing the global marketplace of the year 2000 to that of the 1920s may be a bit like comparing the Pacific Ocean to the Black Sea. Ships afloat on either might sink, and in the same or similar ways, but conditions that would equate with catastrophe in the one might amount to seafaring-as-usual in the other.