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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: MetalTrader who wrote (7430)	9/5/2001 7:41:19 PM
From: cnyndwllr	Read Replies (3) \| Respond to of 23153

MetalTrader, Re: <<What does frighten me is really the aftermath of the anticipated bounce. And this does not reflect my view but rather a concern. If the economic outlook of working off the excesses of the past few (or not so few) years should remain less than robust, what then? If equity markets have entered an extended period of retrenchment, the periods of net positive investment will be compressed and less than stellar.>> I think that's the question we need to periodically ask ourselves. If I can paraphrase with an analogy, I think the question is whether we are a bouncing ball headed down a slope or whether we are on a pogo stick working our way up an undulating hill? In your post I think you are looking at the charts and saying that at least with respect to TA on the S&P, it looks like we are a ball bouncing downhill. I think we are on a pogo stick working our way up the hill and the reason has to do with some long term trends that I think are critically important over the next 5-10 years. The most important, in my view, are the lessening of world trade barriers and the increased economic and political freedom in many heavily populated and previously dark corners of the world. With today's technological advances that can bring educational, economic and political information to the homes of virtually anyone, anywhere, and in any language, information and knowledge can be easily and, in view of historical prices, cheaply acquired. In much of the world this is a commodity that is lacking and is much desired. It is also a commodity that, once started, fuels its own demand. If politics allow, a huge number of people and businesses will spend what resources they have to access the greatest dispenser of on demand knowledge ever known to man; the internet. This means computers, phones, servers, communication lines, satellite, wireless, fax etc. With trade barriers low, a company funded and managed in the US can hire labor in Asia, buy raw materials in South America and sell its product in much of the world. The gains in efficiency are real and should allow technology companies to continue to experience growth in excess of historical levels. Additional growth should occur as technological advances create more useful appliances and applications that increase demand for technology products in places that are already hooked up. We are early on in the technological revolution and new uses will obsolete many of the machines and software we rely on today. While low trade barriers, increased economic and political freedom and technological advances are factors which indicate to me that technology growth will continue far into the future, another factor also indicates that the mid term trend will be up. The richest group in the world has spent money on cars, homes, kids, vacations etc, and is now spending more money on funding retirement. Those of us who are baby boomers are creating a demand for retirement assets that raises the price of those assets INDEPENDANT OF THE HISTORICAL VALUE OF THE ASSETS THEMSELVES. Put simply, if future income or assets are what you want to buy and if a lot of other people want to buy them also, the price of those assets will rise. Historically one of the best class of assets to buy over a multi-year period to maximize your return were equities. More people buying good stocks means higher prices for good stocks. Just look at the money in mutual funds which has to go somewhere and the reason for some of the bubble is apparent. That reason will persist when the major bubble is burst. This thinking convinces me that there will be no multiyear period of retrenchment. The real concerns are war and energy. Absent those, I am betting that the 1 year, 2 year, 5 year and 10 year trends are all up. I know we got ahead of ourselves but all the hype that got us so worked up then was based on real facts that exist today and will assert themselves in the market in the near future. That's why I think that holding orcle at 14 is ok, even if it goes to 9. That's also why I dimly suspect that you have to combine TA with FA to sort out the "real" economic influences from the psychological influences in the market. Of course I've been wrong before. Ed