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To: pater tenebrarum who wrote (91205)	4/7/2001 9:30:15 AM
From: Box-By-The-Riviera™	Read Replies (7) \| Respond to of 436258

from bronson on longwaves to hays Don Hays and others have been calling for the end of the bear market because of the 10-day moving average of the ARMS Index (same as Trin) exceeding 1.50% I have sent him a question excerpted below, and I will advise of his answer if appropriate: I think you've overstated the history of the Arms, or Trin, index, Don. Dick Arms is the first to point out that advancing and declining volume statistics weren't even available before the late 1960s, which is when my partner and I first started our institutional advisory service and managing money. By way of background, we made money for our clients during the period from the 1968 high to the 1974 low. Don't you think you should warn your readers that you really don't know how extreme the Arms readings were during the previous 40 years before bear markets made their final lows? We have done some simulations and are convinced that the 10-day moving average, with which you are giving so much weight, prematurely triggered repeatedly all the way down in the 1929-32 side, as the most important counter example of its effectiveness. You know trying to catch failing knives can be very dangerous to one's wealth, so what's your hurry? Furthermore, there are many other deflationary similarities today with that period. We believe jumping back in when new post WWII records are made in arbitrarily-designed technical indicators is one of the reasons why this time will prove to be quite different and even partially why individual investors haven't capitulated yet - everybody is telling them to hold on because this and that indicator suggest the bottom is very close at hand: a sharp V-bottom in the recent rapid deterioration of corporate earnings is just a quarter or two away and the market mind can see that; you have to buy before the non-recession is even recognized since it has always worked that way - post WWII; the Fed saves the day over 85% of the time because the market has gone up 13 out of 15 times during the year following several rate cuts, etc., etc., etc . Upon careful examination, every one of those arguments can be shown to be flawed, and in any case, they are being promoted on TV every day mainly by those who never had a unambiguous 100% sell signal and/or who don't manage real money! I think you know what I mean. Can you explain why insiders have, incredibly, have continuously sold this decline, and they have not yet even started net buying? We think we know why, but I would be very interested in your considered opinion. Thanx in advance for your response. Bob Bronson

To: pater tenebrarum who wrote (91205)	4/7/2001 1:52:38 PM
From: re3	Read Replies (1) \| Respond to of 436258

heinz i don't know if you've already commented on thia, but i'd sure appreciate your input : Message 15630716

To: pater tenebrarum who wrote (91205)	4/7/2001 4:04:28 PM
From: AllansAlias	Read Replies (5) \| Respond to of 436258

Brafoo looks at NASDAQ up days and volatility: geocities.com

To: pater tenebrarum who wrote (91205)	4/8/2001 8:45:45 PM
From: AllansAlias	Read Replies (3) \| Respond to of 436258

Heinz, I posted the original to you, so we'll keep it neat and tidy here... I updated this page geocities.com to include a Dow daily that goes back to 1900. Some interesting features there for the curious reader. (People who have already seen this can simply scroll to the bottom. Only one new chart was added. If you load this and do not see a new Dow chart at the end, then hit Refresh/Reload.)

To: pater tenebrarum who wrote (91205)	4/8/2001 11:37:04 PM
From: ild	Read Replies (2) \| Respond to of 436258

Heinz, I'm not sure if you have seen this: How Much Could a U.S. Recession Hurt Credit Card Losses? The entire 2000 California budget surplus can be accounted for by capital gains and stock option exercise at Cisco Systems Inc. alone standardandpoors.com

To: pater tenebrarum who wrote (91205)	4/9/2001 8:08:10 AM
From: Box-By-The-Riviera™	Read Replies (2) \| Respond to of 436258

a longwaves comment on p/e ratios Thanks very much for calling this important update to our attention. The current conclusion of Campbell and Shiller--that P/E ratios are not predictive of future earnings growth rates-- is really implicit in, and quite evident in, their first paper. About a month ago I presented here a reference to the recent paper of Pu Shen, an economist with the Kansas City Federal Reserve Bank. groups.yahoo.com kc.frb.org Shen reviewed the original 1998 Campbell and Shiller paper and came to the conclusion that their scattergram chart of P/E's and future earnings growth rates did NOT show a valid relationship. Thus Campbell and Shiller have really been "under the gun" to revise their conclusions. This is important because some have attempted to use the original faulty Campbell Shiller conclusions as justification for currently projecting a major economic depression going forward. Our own Bob Bronson, who has done a study of historic P/E cycles, is one of those economic bears, based partly on the Campbell Shiller studies. Bob had this to say, in part, about Shen's study: "One thing that she does feature from the current literature is that high stock market P/E ratios predict lower earnings growth rates (as well as lower stock market prices). Of course, this is totally contradictory to those who "hope" that the current declining trend in earnings growth rates(see attached chart) will prove to be transitory. We doubt it because our forecasting models tell us that aggregate corporate earnings growth rates will under perform their recent past for many, many years." First, this is now shown once more not to be true. Second, this will be a much harderbelief to sustain now that Campbell and Shiller have retracted their original conclusion. My own belief is that Campbell and Shiller will eventually have to retract their other main conclusion: that future stock prices are predicted by current P/E ratios. Just to take the scattergram examples relating to high P/E's (and shown in Shen's article), there were 14 years whose trailing ten year P/E ratios exceeded 20. In only 4 of those years did the subsequent decade's stock price decline by more than 2%. There were six such years with P/E's over 20 whose next decade price increased by more than 2%. If one looks at less extreme P/E's, the results show that there are very few years whose subsequent decade produce lower prices. Thus the evidence suggests that P/E's are not very useful at all either for earnings or price projections. In fact P/E ratios are like book value per share and other legal and accounting measures which really have little relevance in comparing one era to another. Their relevance is a chesnut of 1930's and 1940's investment approaches which has not stood the test of time. Tom Drake Campbell Shiller Abstract: NBER WORKING PAPER BIBLIOGRAPHIC ENTRY Valuation Ratios and the Long-Run Stock Market Outlook: An Update John Y. Campbell, Robert J. Shiller NBER Working Paper No. W8221 Issued in April 2001 ---- Abstract ----- The use of price earnings ratios and dividend-price ratios as forecasting variables for the stock market is examined using aggregate annual US data 1871 to 2000 and aggregate quarterly data for twelve countries since 1970. Various simple efficient- markets models of financial markets imply that these ratios should be useful in forecasting future dividend growth, future earnings growth, or future productivity growth. We conclude that, overall, the ratios do poorly in forecasting any of these. Rather, the ratios appear to be useful primarily in forecasting future stock price changes, contrary to the simple efficient-markets models. This paper is an update of our earlier paper (1998), to take account of the remarkable behavior of the stock market in the closing years of the twentieth century. ++++++++++++++++++++++++++++++++++++++++++++++++++ Date: Sat Apr 7, 2001 9:48am Subject: Most interesting article by Shiller on PE ratios papers.nber.org TD@TenorioResearch.itgo.com tenorioresearch.itgo.com