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Strategies & Market Trends : Mu Gamma Lambda -- Ignore unavailable to you. Want to Upgrade?

To: Oral Roberts who wrote (5459)	9/5/2001 9:00:08 AM
From: Rich1	Read Replies (1) \| Respond to of 10077

6250 bottom of new channel.. We get there the world will have a world wide depression IMHO..

To: Oral Roberts who wrote (5459)	9/5/2001 11:38:17 AM
From: Original Mad Dog	Read Replies (2) \| Respond to of 10077

That's an interesting Dow chart Jeff....a few comments: 1. While the very long term green line on the chart suggests we should be at 6250 now.....in another four or five years that line would be around 10000. Would anybody really be shocked if the market essentially treaded water for years after what it's been through? It is not necessary for the market to plunge to that line to validate the line as the proper baseline, the line can continue to progress upward through time until it meets the level of the market. 2. The Blue Line describes a rapid growth rate under which the value of the index doubles essentially every four years or so. That is a return of about 18 percent a year. Long term that does not happen. If it did, I could put 10K in my newborn's college fund and have about $175,000 when he is ready to start college without adding another dime. Do you really expect that rate of return long term? 3. It is possible that the reality of our long term economic fundamentals give you a long term trend line in between the Blue Line and the Green Line. Under that scenario, the Dow should be at 10000 in the relatively near future anyways, and there would be no need for extreme pessimism. 4. The Dow is not really measured properly as an index anyways, and its constituent companies have dramatically changed in the past decade, which really makes it dangerous to use this type of analysis. In 1986, when that chart begins, Union Carbide and some other dogs were in the Dow, and Microsoft and Intel and Home Depot were not. If you go back and factor in the current components from 1986 and refigure the index, what you will find is that the long term trend line is a helluva lot higher than 6250. I remain convinced that this next couple of months are an excellent long term buying opportunity for fundamentally sound companies that don't play games with their earnings or accounting practices generally. (Here's the Dow chart again for reference purposes): stockcharts.com