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To: Glenn D. Rudolph who wrote (113687)	12/30/2000 1:04:56 PM
From: GST	Read Replies (1) \| Respond to of 164684

Glenn: I can tell you exactly what I am thinking. 1. Forecasting a Recession: Last September I could see a sharp slowdown coming -- oil prices are the best, and I mean THE best, economic indicator to predict growth or the lack of it -- much better than even interest rates. We are now in that slowdown and stock prices have fallen. The price decline from March was simply the implosion of the bubble. The stock market decline from September was due to a slowing economy. 2. Stocks are Expensive: Many people will think stocks are cheap -- some might even be cheap. But some are actually very expensive because people fail to realize the impact of an economic slowdown. Profits can get hurt bad -- real bad. And high growth companies can stop growing as well. So, even after a 40% decline on the NAZ, when you take a hard look you will find the pe multiples on stocks on average going up over the next few months. Even now, before taking account of the slowdown, you will find the NAZ 100 has a pe near 100. At current prices this pe is likely to go up simply because the e's are falling. Stocks are more expensive than they might appear. The people most likely to think they are dirt cheap are the same people who could not see last March that we were in a bubble. They will talk now as if we are on the threshold of a major rally based on this false perception of "value" -- an illusion. 3. Hard versus soft landing: Interest rates are coming and there will be a big debate over the size and timing of their impact. This is highly uncertain -- especially the latter. There will be every effort made to taut the first interest rate cut as the return of the bull market -- but this might prove to be very, very simplistic. Economies don't usually just slowdown ala the soft landing scenario. A hard landing is now more likely, with the weather adding more pressure. So what is a hard landing? A hard landing is like a train wreck in the sense that once the cars leave the tracks it is very hard to control anything -- which is why it is so desirable to avoid a hard landing. A hard landing is not like a soft landing with a bit more downside in the stock market. 4. Bear market rally: The three points above indicate we are at risk to go much lower in the stock market. People will sell mutual funds. Check the redemption rates on mutual funds. But based on this idea that "stocks are cheap", and "interest rate cuts will come to the rescue", and "the market looks six months ahead when everything will be great again" -- the stage will be set for some days when it really looks like the market will rally bigtime. These days will be marked by a flurry of posts on the new economy thread and similar places as investors convince themselves that it is time to pile back into speculative equities. These stocks will jump in double digit percentages -- before they soon start their downward trends once more, causing some talk about how the turn is still just around the corner. 5. I will try to play the days when it looks like the suckers want to buy stocks -- especially on days where there could be short covering. And as every rally gasps for air after a brief flurry, I will go short again.