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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (2843)	4/5/2001 11:47:27 PM
From: Golf Pro6	Read Replies (1) \| Respond to of 74559

KastelCo, just came across this thread and must say I am very interested in the discussion - my charts have been indicating for a long time now that there could be a major problem with the broader markets. The Dow and S+P both reflect undeniable parabola formations when you call up the 30 year "All Data" charts on Bigcharts.com, meaning there are only two possible directions from here: greatly up or greatly down. Given that scenario, I would have to bet 10:1 on a major downturn, especially given the fact that important corridor levels have been broken. On the other hand, I am not totally sure how valid linear charts are over such a long time period, as compared to logarithmic charts. Does anybody here have any information on this subject, or know a good site for logarithmic charts? BTW KastelCo, you made some very good points in your post, I personally don't think that all the ramifications of ludicrous vendor financing have yet to hit the fan. I personally know of at least one scenario where a company was being loaned money on a 3:1 basis ie. for every dollar they bought, they were loaned 3! I also identify with your comment on the real estate boom here in Toronto (I'm a fellow Torontonian), I remember well those days and the insane valuations. My parents bought a house in the late 70s and the price increased over 600% by the late 80s - talk about a great short!

To: Cogito Ergo Sum who wrote (2843)	4/6/2001 6:13:13 PM
From: MeDroogies	Read Replies (1) \| Respond to of 74559

I understand what your point was... and there were some instances of easy credit, but it wasn't pervasive. I don't see a clear connection. I am not making an absolute statement, just that there isn't a 1 to 1 correlation across the board. Sure, in some areas it is evident, but not in general. I purchased my first house RIGHT AFTER the real estate bubble in the northeast burst. So, if anything, easy credit was not available. In fact, I fought hard to find the right loan. When I got it, they wanted to push money on me like mad. As for your definition...well, your definition needs definition. What are ridiculous valuations? Define that. I would agree that a PE of 2000 on YHOO was ridiculous, but this defies definition except from a "common sense" standpoint. Hence, the problem. A ridiculous valuation to you didn't seem so ridiculous to many other people who jumped in. You call them bagholders, but at the time, this was not evident. It is an ex-post-facto definition. Had YHOO continued to climb (of course, against all better judgement), they would look like smart investors....which is what so many people looked like during the runup. Bubbles can only be "defined" after the fact. How would you, technically, define a bubble? Is it a bubble when PE ratios (or some other measure) exceeds 20% of the historical average? 30%? 100%? We don't have these figures...do we? We have to make some value judgements in order to create that definition. Irrational exuberance in 1997 looked like Chicken Little in 1999. Now it looks incredibly prescient. That, in a nutshell, is the problem with the definition....was it a bubble in 1997? Who knows? After the fact, we know it was in 1999....some people guessed it beforehand, but many others didn't.