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To: oldirtybastard who wrote (150173)	2/8/2002 10:12:16 AM
From: Petrol	Respond to of 436258

From the Daily Reckoning: "This is a very dangerous market...very!!!" The three exclamations points, along with the sentence itself, come to us from Richard Russell...who was following stocks before your editor was born. Russell is worried. Why? Because the entire economy is straining under an enormous debt burden while stocks are still very expensive and incomes fall. The Labor Department reports that the hours people work just suffered their biggest drop since '91. Fewer hours = less income = less spending = fewer sales, less profit and even higher stock P/Es...unless stock prices fall. Last year alone, the Nasdaq fell 30%. The S&P lost 18%. And the Dow dropped 10%. But profits fell faster - the worst profit collapse since the 1930s. Russell notes that since 1915 there have been 20 periods in which the Fed has cut rates 2 or more times. In 18 of those periods, stocks were higher a year after the cuts began. In only two were they not - the period following 1929 and the current period. "The U.S. economy is heading toward a massive economic depression," writes Steve Puetz. "Investors have been slow to recognize the significance of the ongoing contraction. The majority believes that it's just a normal recession, rather than the developing depression it is." "This is an environment very hostile to stocks," he continues. "Yet cockeyed optimism has pushed stocks to record-high levels based on price-to-book ratios and price-to-earnings ratios - even considering the fact that, for the most part, earnings are entirely fictitious." Of course, it's not just the stock prices...or the losses...or the debt that is worrying. It is also the creeping doubt. Maybe the earnings aren't what they're supposed to be. Maybe the stocks will go down a third year in a row. Maybe rate cuts won't really revive the economy, after all. Maybe this period really IS like '29 and not like any other downturn. Maybe the Japanese are not as dumb as they seem...