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To: AllansAlias who wrote (46545)	7/20/2002 11:32:26 AM
From: Perspective	Read Replies (3) \| Respond to of 209892

I don't know if you know much about electronics or linear control theory, but I like to think of Elliot in the same vein. (This may raise the ire of more than a few Ellioticians.) I view Elliot as a means of describing the behavior of a system when an external stimulus is applied. In linear control theory, if you know what the characteristic of the system is (damping ratio, pole and zero locations, etc.) you can predict the response to any stimulus. I like to think that Elliot describes how the market price mechanism responds to liquidity flow stimuli. A very unstable electronic system responds to a step input with lots of overshoot and ringing, whereas a heavily damped one never overshoots. Elliot says that price responses will have certain characeristics, that moves in the direction of the applied stimulus will unfold in impulsive fashion. The stuff we call corrective is akin to the ringing of an underdamped linear control system. The only catch is that there is a HUGE amount of feedback in economic systems, psychological and monetary, so drawing the dividing line between what constitutes an external stimulus and just the behavior of the system itself gets a little tricky. Just a little food for thought... Oh - and my central point - the liquidity input applied in preparation for Y2K was so huge that it swamped out the natural response of the system. You can shape an input that way if you apply a ramp rather than a step, and you get no ringing even from an underdamped system. If we are seeing the mirror image of that liquidity ramp applied to the system, bounces will remain brief. That said, I'm less than fully exposed right now, just in case somebody figures out how to stem the drain. BC

To: AllansAlias who wrote (46545)	7/20/2002 2:03:51 PM
From: Shack	Read Replies (2) \| Respond to of 209892

This is all most fascinating and we have to work together here to stay objective, at this point more than any other Along these lines, let us not forget that the monetary aggregates are still showing decent growth, albeit off the torrid pace of last spring. The credit bubble has a long way to go before it unwinds and I would argue that there is no hard evidence of it yet despite all the conditions being in place. I suspect we will have to wait for falling home prices as that is where most of the paper lies.

To: AllansAlias who wrote (46545)	7/20/2002 2:18:44 PM
From: AllansAlias	Read Replies (4) \| Respond to of 209892

I maintain that we are close in time to a sharp rally. Price, well, that's another matter. Conceptually, I will consider the next up move to be "wave 2 of the credit bubble bursting". It is the move after that that I fear. I wanted to clarify/expand this a little. The coming up leg, a conceptual 2 up for the credit bubble, should be a big 'B' up for equities. At the top, folks will be bullish again. (That goes without saying. You can't have a "top" without it.) The really ugly move is likely not the one we are witnessing now; it'll be the conceptual wave 3 down for the credit bubble and the 'C' down for equities. Imo, there is a good, many-month rally in the near future, but after that, I think we'll see a far worse slide than the one we are experiencing now.

To: AllansAlias who wrote (46545)	7/21/2002 4:54:25 PM
From: NOW	Read Replies (1) \| Respond to of 209892

we are not even close the the denial stage for credit bubble's bursting by the general public IMO. THey are still at the pre-cognitive stage on that one, i am reasonably certain. the denial stage we are just now leaving is the notion that accounting gamesmanship was limited to a few corporations, and we are now just in the depression stage of the tech/telecom bubble.

To: AllansAlias who wrote (46545)	7/21/2002 9:35:19 PM
From: reaper	Read Replies (3) \| Respond to of 209892

AA <<Still, when the tech bubble exploded, there were many a fine rally on the way down that schooled the complacent bear>> well then i guess i missed class those days as i have not been the least bit schooled. i haven't covered sh8t in three years except in cases of going-ot-of-business sales (Mutual Risk; NextCard; Enron; Hanover Compressor; HomeStore, etc). the friggin' Wizard of Oz is more powerful and scary than the Rubin bull <g> the tech bubble and the credit bubble are different. the tech bubble is a friggin' toy popgun compared to the H-bomb that is the credit bubble. when 360 Networks goes under and can't pay its bills to Lucent, or its creditors, in the overall scheme of things it is no big deal. when MBIA's balance sheet is impaired and the State of MA can't get a bond deal underwritten to finance the Big Dig, and Fleet can't securitize the receivables associtad with its 4.25% home equity lines, then, Houston, we have a problem. Liquidity will evaporate and the Minsky ponzi economy in which we operate will cease to function properly. go back to Bobcor's linear controls post. i'm sorry, i'm getting preachy and taunting again. i do not mean to be so, but frankly i'm afraid for my friends and parents if my worst-case scenario does come to pass. plus i'm pissed 'cause the Red Sox blew two late-inning leads and Lance, though he put huge time on his rivals, did not win the stage up the Ventoux today. Cheers