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

To: Frank Pembleton who wrote (15089)	7/2/2002 9:42:31 PM
From: Art Bechhoefer	Read Replies (3) \| Respond to of 36161

Frank, the obvious weakness in this thinking, which is sound at the macro level, is that perceptive investors don't invest in the market. Instead they invest in outstanding companies. It took a long time for the DJIA to recover after the crash of 1929. Some analysts say it didn't recover for more than 20 years. But some companies, like 3M, did very well during the period when the AVERAGE stock did poorly. There are a few really outstanding companies around, with price-earnings ratios in the 10 - 20 range, price to sales less than 1, and book value at or near market value, with a growing market for their products or services. I'd rather stick to a few good ones than worry about the average. Art

To: Frank Pembleton who wrote (15089)	7/3/2002 6:14:30 PM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 36161

re: ["- "If P/E ratios fall," says Laing, "the stock market will cave [a verb...ed.] in the years ahead even if profits exhibit sprightly growth. In the Seventies, for example, the stock market was largely a range-bound flatliner despite a tripling in corporate profits because P/E multiples collapsed during the decade."] ...PE compression is the entire point here. PE multiples EXPAND during Fed Rate "cut" cycles. PE multiples CONTRACT during Fed Rate "hike" cycles. ...given the present Fed Funds Rate and the unprecedented rate cut cycle we just exited - PE CONTRACTION is a given. Throw in inflated earnings, the growing mis-trust of corporate America and add in a risk discount for Terrorism and how unrealistic is it for the market to not just return to a historic norm of say a PE of 15, but to over-shoot to the downside - given the unique set of market conditions post this bubble collapse ? This is why I can not believe that 99% of Fund Mgrs have less than 5% cash.... it's insane. We have a multitude of "rogue wave" event catalysts out there and for a fund manager to have only 2,3 or 5% cash to throw at another 9/11 event driven market blow off - is lost opportunity cost. What made Fidelity Fifty's John Muresianu such an outstanding example of how to manage OPM money for "THIS" market environment - was NOT primarially his strong play on GOLD, but rather his huge 30% CASH position ! Fund Mgrs who must continually fade stocks due to fund outflows, or who only have 2,3, to 5% cash to "throw" at the next major market meltdown event - are doing nothing more than dollar cost averaging in, or out - on a continual basis (at the mercy of fund flows)... and most people would be better off (and were)to just dollar cost average into an index fund - vs. throwing their money to this mindless system of management. Warren Buffet recently sounded the siren of reality - that history is replete with examples of decades of stock market flatline performance into expanding economic cycles and rising corporate earnings. The single greatest misconception facing the general investing public here imho - is that if/when the economy turns up - the stock market will and must follow. WRONGO ! Given the inevitability of PE Compression in a rising rate environment, let alone factoring corporate and accounting mistrust and the continued Debt implosion and ongoing general bubble deflation... this is going to crush people... as they'll pile into the market as we get more positive economic recovery news - but, the market will continue to GRIND ever lower... and they'll be mystified as to why.... GREED was the cause and CASH, PATIENCE and a little GOLD/SILVER is the cure...