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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Paul Shread who wrote (312)	8/21/2001 4:20:20 PM
From: John Madarasz	Read Replies (1) \| Respond to of 36161

If you don't see this bear as being in the same league as the 70 year long wave...then wouldn't that lend credence to the shorter K wave cycle here instead, and in general?

To: Paul Shread who wrote (312)	8/21/2001 4:27:03 PM
From: E. Graphs	Respond to of 36161

Ask him what he thinks of this potential diamond reversal on the chart of gold vs the potential diamond reversal of the Dow, if you could. stockcharts.com[h,a]diclyymy[d19900101,20010822][pb50!b100!b200!f][vc60][iLb14!Le12,26,9!Lc20]

To: Paul Shread who wrote (312)	8/21/2001 4:44:06 PM
From: gold$10k	Read Replies (1) \| Respond to of 36161

Paul, I find your friend's 72 year Long Wave cycle interesting. In Robert Shiller's book "Irrational Exuberance" on page 6, there's a chart of the REAL (inflation adjusted) S&P Composite Stock Price Index along with the REAL (inflation adjusted) S&P Composite earnings dating back to 1870, which was a real eye-opener for me. It shows that REAL earnings have risen from 10 to 40 (4x) since then. If I were to draw a more or less median straight line through the REAL prices, they would show an increase from about 80 to 320 which is the same ratio of 4 to 1. This echoes Warren Buffett's adage that over the long run, stock prices follow earnings. However, REAL prices at the beginning of the year 2000 were at 1400, implying that stock prices at that time were overvalued by 1400/320 = more than 4x. By comparison, the bubble of 1929 reached a REAL price of maybe 300 compared to the median line at 150 (2x overvalued), and the bubble of 1966 reached a REAL price of maybe 500 compared to the median line at 150 (3x overvalued). This chart alone gives perspective as to how historically overvalued the market is... and not just the NAZ. If the S&P Composite is 4x overvalued, then a 75% haircut is in order and perhaps your market historian friend's Long Wave expectations will be borne out. However, I wouldn't count on it, as I expect more of a 70's type scenario where there's a big trading range for 5 or 10 years or more, BWDIK? vt