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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: paul richards who wrote (31239)	3/18/2001 9:44:38 AM
From: j g cordes	Respond to of 69822

Paul, "charts can be made to look anyway you wish. This basic chart strips all adjustments out to show that over the long haul the Dow has never exceeded 1,000 until recently." That's my point, the Dow charts you've posted aren't telling or significant exactly because there's no context to the data plots. As you admit charts can look any way you wish. One can plot using log or arith scale, but the price one's plotting represents many underlying causes. To simply see an acceleration in slope by itself is meaningless as all steep slopes don't end with a crash. For example .. lets take company YZA For the first 5 years its growth is steady at 10% per year... its raw stock price climbs evenly with the business from 100 to 110, 121,132,143. Everything looks normal and within range. But lets say the company next goes international while the Berlin Wall falls and there's an international currency crisis flooding the American market with foreign assets. The company's growth rate accelerates to 20% and anaylsts boost their price targets for the next two years.. We get 143, then 171 then 205 stock prices and everything looks normal except we have a bubble forming. Then lets say the Japanese and Europeans love this company's product and account for 50% of sales, at the same time the US Dollar soars against the Yen. Inflation is kind with low borrowing rates and when profits are repatriated the stock goes through the roof surprising analysts with 45% profitability and booming overseas profits. Sounds like a bubble forming.. but how is it deflated and to what measure of price should the stock fall to be fairly valued? Does one strip out the contribution of currency thinking that Japan will return to 1980's parity. and what's norm after the cold war ends and the US is a reigning superpower? Does one strip out inflation to arrive at fair value thinking that the real norm for inflation is what the world experienced over the last 80 years, not the last ten? Looking at the Japanese market chart one can make a substantial argument that its the chart of an island of deflationary policies in a world of inflationary policies... not a chart of a bubble gone bust. Anyway.. my apologies for going on about charts. Yes by most standards we've popped a stock price bubble especially in techs, dot coms were a disaster for the investing public, we may be in a strong equity counter trend though I think its less dire than gloom and doom would have it. I am concerned the current government is leveraging market worries to gain its political agenda. I'll go out on a limb and say Greenspan goes for a 75 basis point cut.. we'll need a productive low unemployment economy for the next ten years just to barely keep pace with current projections of debt service and spending.