Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: lurqer who wrote (8291)	10/22/2002 1:27:24 PM
From: lurqer	Read Replies (1) \| Respond to of 89467

The down elevator’s route. In a previous post, I outlined the Panic to Mania cycle Message 18142540 and concluded that we were in the panic stage. Again referring to the Two Century Dow Chart geocities.com note that prior to ’00, the two previous secular bull tops were in ’29 and ’66. From the ’29 top, the market declined in an almost straight line to the vicinity of the lower channel line. In the ’66 to ’82 secular bear market, the plunge from the ’66 high to the ’74 price low near the lower channel line has a two tiered plateau between ’66 and ’72. While as indicated on the chart, the value of stocks declined between ’76 and ’82 because of sever inflation, the prices oscillated sideways. If you inflate a balloon and then let it go, it will rocket around from the force of the venting gas. The more you inflate the balloon, the higher the pressure and the more force that is exerted during deflation. I could be wrong, but I believe a similar phenomena exists with markets. The higher the mania peak, the greater the downward “force” pressing the market toward the lower channel. Since in ’00, we had the highest peak (as measured by evaluations) ever, one scenario would be for the market to go straight to the lower channel line. But I don’t think so. To understand why, you must have a reason for secular bull and bear markets. I subscribe to H. Dents belief that long term secular trends are a function of the spending patterns of large demographic bulges in the population. In his several books, Dent exhibits the remarkably close correlation between the spending patterns of the demographic bulges and the large secular patterns of the market. IMO, Dent both pushes his argument to far in trying explain detail market “wiggles” with demographics, and by leaving out other market influence factors – like human emotion. Nevertheless, his exhibited correlation between the large secular trends and the spending demographic is compelling. In the ’29 to ’32 Panic decline, the market collapse coincided with a precipitous decline in demographic spending. In ’66, the Market peak occurred prior to the spending decline. This, I believe, is the cause of that two tiered plateau, between ’66 and ’72. Only when the generational spending decline occurred in ’72 did the market plummet to the lower channel. One could hypothesize that a decline in the upper half of the channel is caused by CapEx spending cuts resulting from the overbuilding during the mania. But to get the decline through the lower half of the channel, significant reduction in consumer spending is required. In both the ’29 to ’32 and the ’66 to ’74 declines, the lower channels were approached only after the boomer’s grandparents and parents had passed their peak spending years. So what does the demographics tell us about the current decline? Again, like ’66, the market mania peaked prior to the demographic spending peak. This would imply that we may have some “fine structure” of a sideways oscillating plateau before the final plunge to the lower channel. OTOH, the mania peak in ’00 considerably exceeded the mania of the ’66 Go-Go peak. Thus, there may be significantly more “force” to push us directly to the lower channel. While a straight line descent to the lower channel cannot be ruled out, I believe that the demographic spending will “cushion” our fall until ’07. Note that with the subdued mania of the ’66 peak, and hence, less downward pressure, the “cushioning” occurred in the upper half of the channel. I suspect that the greater downward pressure of the ’00 decline will cause the bounce to occur near the center line – around Dow 4900. I would then expect the market to oscillate sideways until ’07 before falling to the lower channel at Dow 2900. This bounce and oscillation off the center line is similar to what occurred at the centerline during the secular ’82 to ’00 bull market in ’87. Depending upon how many oscillations occur before ’07, you get various market scenarios. I currently favor a Twin Top scenario, but that is another post. lurqer