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To: patron_anejo_por_favor who wrote (97126)	4/22/2001 10:58:33 AM
From: Box-By-The-Riviera™	Read Replies (2) \| Respond to of 436258

some interesting musings from EVB at longwaves... Over the past couple of years I have been laying out a scenario of transition for the end of the down grade. Briefly my argument is that the worst of the down grade is far behind us and that the shift from deflation to inflation requires a period of transition where the economy reaches for a short while equilibrium, I was challenged by many for this scenario right from the beginning. When I compared the current period with the late 1940’s and the mid 1890’s, the criticism increased to ridicule. While there is ample evidence to support my scenario the majority have embraced an extended plateau scenario. So from time to time is it interesting to look at how events are supporting the transition. The other side of the argument was the concept of and extended plateau. Forget that there is no evidence to support this concept with past cycles of an extended top and longer periodicity to the long wave. The general concept is the economy is so over extended and debt ridded. When the bubble bursts the massive debt and speculation will cause the economy to self destruct. Well based on the NASDAQ Index surely we have reached this level of self destruct. But strangely something happen on the way to a major depression, the economy continues to expand. Using 1929 as a template one would expect, with such a severe decline in the NASDAQ, that the decline would bring down the economy After the peak in 1929 the economy contracted dramatically, almost coincident with the peak. By some measures the economy had begun to contract a year previous to the peak. By a year after the 1929 stock peak the economy was in very sad shape and unemployment had already reached high levels and a number of banks had failed. Prices of oil and other industrial commodities peaked in 1929 and headed lower quickly due to the lack of demand. Oil prices decline with the 1998 Asian Crisis but have since recovered. Most significantly unlike 1929 liquidity remains high. Now one could argue that the damage is mostly in high tech due to the NASDAQ smash down. And true the Internet IPO sector has been decimated. But at the same time unemployment has not increased dramatically and even in the high tech area technical people that have been displaced are easily reabsorbed into new jobs. The tough sell in the employment area in Silicon Valley are the low skilled technical people and sales and marketing types. Mean while the other shoe of the Dow refuses to drop and this week climbed rapidly back to almost 11,000 – less than 10% off its all time highs. In 1929 the decline as with 1987 was systemic – all stocks declined in value rapidly. One of the ingredients of the transition that I proposed was for the averages to correct in a flat configuration building a base for the next major advance while PE ratios dropped. Using 1946-9 as a template, PE ratios dropped from a record highs to record lows while the market consolidated. This decline in PEs was a result of an expanding economy that the market run up had previously discounted. In the case of 1929 PEs did not decline with the market – just the opposite they increased! By the time the lows were made in 1932-3 PE ratios were almost double what they were in 1928-29. So ok this could be expected in the DOW market that has held up and was discounted by the run on the NASDAQ sucking money away from value stocks that seemed unglamorous at the time. But if one looks at some of the earnings reports coming, out earnings are holding up and in some cases advancing. This should not be happening in a wash out from a plateau. The real story, however, is the growth in revenue. In many cases revenues are up 100% or more from a year ago. On top of this some of these companies, having paid the price of infrastructure development, are now starting to keep more of the revenues as profit. There are still a few Communist companies around – yes they still exist – but not to the extent of a year ago. Reality has set in as the end benefits of wealth creation is beginning to pay off. But then George, Curtis, Richard and Robert could all be right and things could just crash and accelerate downward from here lead by the DOW. Eric Von Baranov The Kondratyev Wave Theory Letters www.kondratyev.com

To: patron_anejo_por_favor who wrote (97126)	4/22/2001 4:35:03 PM
From: Spekulatius	Read Replies (1) \| Respond to of 436258

>> Duisenberg blasts Fed (and O'Neill) again today: << The ECB goal is to fortify the confidence in the synthetic Euro currency. This, the stronger economic fundamentals and the undervaluation (about 25%) of the Euro make me think that Euro Bonds are an extremely promising conservative investment. Greenspan is looking more and more ridicolous, looking at clownish numbers like First Call estimates and bandwith prices. The excess money supply will go into mortgage and consumer credit and will do nothing to support industries with weak fundamentals.

To: patron_anejo_por_favor who wrote (97126)	4/22/2001 4:50:21 PM
From: NOW	Read Replies (1) \| Respond to of 436258

Why EURO LONG BONDS? Euro short bonds maybe better, no?