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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (54191)	8/16/2001 9:15:32 AM
From: William H Huebl	Read Replies (2) \| Respond to of 94695

Yeah... yawn, the excitement is underwhelming!

To: robert b furman who wrote (54191)	8/16/2001 10:18:31 AM
From: Bill Ounce	Read Replies (2) \| Respond to of 94695

Got a laugh out of the logic from this one: "Have past crashes jumped off from an oversold condition like we're in now? " Nothing personal, but assuming "the market is always correct" a crash can not occur from an over-sold condition. Hindsight will say that it was overvalued pre-crash. But, this also assumes that the market was "correct" 18 months ago when people completely ignored earnings for NASDAQ stocks. That makes things even more humorous! Such is the wisdom of the market ^_^ Seriously, there are reasons to believe that we are only half way to the bottom at this time. (1) long term P/E We've all been reading that by pre-NASDAQ mania bubble, stocks are still over-valued from a long-term P/E perspective. This goes double for tech stocks. Their P/Es have remained pretty high because their earning have dropped at about the same rate as their stock price. Isn't P/E is supposed to indicate long-term growth rate? From that perspective, we aren't in an "oversold condition". From a P/E perspective, we are in about the same shape as we were at the height of the tech bubble mania. Both earnings and share prices are down around 60%. (2) incredible number of shares out there There were so many splits during the mania that even the $1.00 stocks that seem to have been completely trashed might be overvalued because there are enough shares out there that the market cap is still pretty large. There may be something in the human brain that thinks $1.00 is an adequate trashing for a stock with a really poor long-term earnings perspective, but it might really require a nickle/share valuation to bring down the market cap to what it should be. (3) post-crash book value Crashes generally result in people getting so scared that valuation goes to .8 * book value. So far, this time it's been different. So, perhaps this has been a correction and not a crash (so far). (4) boomer real estate holding things up I believe that the stable value of homes has kept people from panic. It's OK if your stock portfolio is in the toilet when your living in a valuable nest egg. If real estate takes a hit that will be the flush that sends stock portfolios down the drain into the septic system. The actual trigger mechanism is a large enough number of boomers getting laid off because of a continuing stagnant economy. My belief is that the market is fairly valued if a strong tech recovery begins in the next 6 months or so. If not, it is over-valued.