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

To: westpacific who wrote (3412)	5/4/2001 8:05:43 AM
From: Ilaine	Read Replies (1) \| Respond to of 74559

NYSE was not the only game in town back then. There were exchanges in several large cities, trading local stocks, e.g., the San Francisco stock exchange was organized to sell mining stocks. Further, there were OTC and what they called "curb" - that was where your Nasdaq style stocks were sold. New issues were not sold on the NYSE. Stocks sold on the NYSE were no safer than stocks sold at the curb. Back then there was no SEC. Publicly sold companies were not required to have independent audits, nor to file annual or quarterly reports. Some voluntarily sent annual reports to shareholders, fewer voluntarily sent quarterly reports to shareholders. Outright fraud was rampant. The President of the NYSE stated publicly that they simply did not have the time or staff to police the companies which were sold, and suggested that this was a task for the Better Business Bureau. (!) Listing qualifications were examined by a volunteer staff of exchange members staying after hours. In 1929, no application for listing had been turned down for years. As for the derivatives issue - I think what is most troubling to everyone is that it is simply an unknown. It is a fact that for those engaged in foreign trade, the failure to engage in currency hedging is what is speculative. So derivatives, per se, are not evil. But you do need a fancy degree in math to understand them. An investment isn't "junk" unless it fails to pan out. Taking risks is inherent in every investment. Just burying your cash isn't what banks do. "Emerging countries" - that's not a dirty word to me. I don't gamble but I am willing to bet, with nothing at stake but the right to say "I told you so" that the US dollar is going down in the foreseeable future. So your investment in other countries benefits just by the exchange rate. That's something for a long term investor, not a day trader. Will the unwinding of derivatives and hedging take down the market like a house of cards? Maybe - but what that shows is not that the market is overvalued, but that forced sales of assets causes things to be sold cheaply. A falling tide lowers all boats. The market may be overvalued, but that's not the thing that proves it. Fair market value is what a willing buyer will pay to a willing seller. When your holdings are being dumped by a margin clerk for whatever the market will bear, that's not a fair market transaction. Is the market still overvalued? I think so. Can it go down further? I think yes. Will it be a repeat of 1929? No. It will be different. In the summer of 1929, before the Great Crash, there was already 17% unemployment in New York state. Bank failures were accelerating - almost 1,000 in 1928. I suspect nothing I am telling you will change your mind in the least, but I don't mind trying. We may have a recession. We may have a depression. The stock market may go down much further. The stock market may crash. But at this moment - I don't think any of those possibilities are inevitable. Back then the Fed was actively trying to cool off the stock market by restricting the money supply. Can the Fed pump us out of this recession? Maybe.

To: westpacific who wrote (3412)	5/4/2001 10:10:23 AM
From: Cogito Ergo Sum	Read Replies (2) \| Respond to of 74559

'No instead we have banks holding massive derivative issues' Curious, a while back I went cash (Gov Bond Fund) in one of my kids accounts. Even in a government bond fund however, a codicil was in place specifying that the fund 'may' from time to time employ derivatives as a hedge. Gee, here I thought investing in government bonds WAS a hedge. Lesson buy your own bonds. Never mind the fund ? Silli Silly me. (Altered Images) regards Kastel