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To: Kevin Rose who wrote (133396)	3/25/2001 1:44:47 AM
From: Little Joe	Respond to of 769667

Kevin: "The question is: does the market have to experience the direct opposite feeling from the high to the low in order to reverse? Who made up that rule? " Good point. I have read a lot about this by many commentators and all I can say is that my observations over many years of investing bear it out. It is an old adage. Baron Von Rothschild, I believe, coined the phrase "Buy when there is blood in the streets". The best book I have ever read about bubbles and manias was written by a guy named Thackery. It is called "Unusual Popular Delusions and the Madness of Crowds." The chapter about the Tulip Mania in Holland is just incredible. Little joe

To: Kevin Rose who wrote (133396)	3/25/2001 2:31:47 AM
From: Nadine Carroll	Read Replies (1) \| Respond to of 769667

Kevin, Let me chime in and agree with Little Joe. I would also add, that having created a bubble, Greenspan's options are limited. He can lower interest and print money (he's been doing both), but he has a limited amount of running room before inflation kicks up (contrary to reports, it has been creeping up for several years; the government figures have been fudged due to the use of hedonic dollars which count increased computer power as increased productivity), the dollar blows up (we are largely dependent on the "kindness of strangers" to hold treasury debt), or he finds himself just plain pushing on a string because American corporations and citizens are sitting on unsustainable levels of debt. I recommend Doug Noland's Credit Bubble column on www.prudentbear.com for educational reading. Also, to add to what Little Joe said about P/E reversion to the mean, you have to also consider how poor the quality of many reported earnings is. They have been puffed up and accepted uncritically by "analysts" and bubblevision for the last few years. Favorite tricks include: paying employees with stock options in lieu of cash (stock options do not count as expenses), buying earnings growth by acquisitions (you then sweep the acquired company's expenses into "one-time acquisition related costs" and tell analysts to ignore them), and running a hedge fund on the side and sweeping investment profits into general earnings (Intel is a case point here; all its earnings "growth" last year came from investments). These tricks don't work so well in a falling market. Also, the SEC, busy shutting the barn door after the horse is gone, is cracking down now on some of the more egregious accounting shenanigans that have gone on -- reporting EBITDA and "pro-forma earnings" instead of net income. All this points to collapsing earnings, not just from actual cutbacks in spending and revenues, but also from the failure of the accounting tricks that have been used to create the illusion of ever-rising earnings for the past few years.