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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: JRI who wrote (58435)	11/2/2002 5:53:15 PM
From: skinowski	Read Replies (1) \| Respond to of 209892

Thanks... Have been ignoring Barrons for some time. I knew that Laing was visiting Gainsville recently. This is in itself an indicator - last time, I'm told, he came there towards the end of a serious slump - I think in 1990, but I'm not sure. Here are the last few paragraphs of the article: --------------------------------------------------------- Deflation is above all a psychological phenomenon, and therefore, according to Prechter, not ultimately reversible by either stimulative fiscal policy or monetary policy. And it typically first shows up in the stock market. That's where social mood shifts always evince themselves first. He elaborates: "You can sell stocks or other financial instruments in a matter of seconds while it takes months for, say, a company to change from an expansion to a contraction mode. The latter is like turning around an ocean liner. It takes time." Mild stock market declines spawn recessions more often than not. In fact, the stock market has had a better predictive record than other leading indicators of economic activity. Overinvestment in capital goods only exacerbates the situation. Full-fledged stock market crashes have always preceded serious economic downturns. In large part, that's because panic selling snuffs personal wealth and destroys collateral values, which can beget further liquidation. The contagion then spreads to other asset classes and then to the real economy of prices and wages and corporate sales and profits, Prechter adds. Lethal collapse What will make the coming economic collapse so lethal, says Prechter, is the mania that has likewise taken place in the U.S. credit market over the past two decades. Total U.S. debt -- household, corporate and government borrowing -- has exploded from under 140% to nearly 300% of GDP in the last 20 years. The previous peak was the 264% level reached after the 'Twenties economic boom. Like then, the shift from credit expansion to credit contraction this time around figures to catch everyone in its undertow: over-leveraged homeowners, free-spending state and local governments and even corporations with average debt loads, Prechter claims. This should be especially true these days when so many loans are either backed by dubious collateral value or finance consumption rather than productive enterprise. Happily, chances are that Prechter will be proved wrong this time as he has so many times before in the last decade. We've only had two full-fledged depressions in the last 200 years, so they are rare occurrences indeed. The post-2000 bear market has already been notable in both its severity and length. The current rally seems to have legs. But the unimaginable does sometimes come to pass, as the events of Sept. 11 so clearly illustrated. So, perhaps there's some value in considering a worst case scenario. A little paranoia, after all, can sometimes be an investor's best defense.

To: JRI who wrote (58435)	11/3/2002 10:35:15 AM
From: Perspective	Read Replies (1) \| Respond to of 209892

Know my motto? In bull markets, follow the bullish arguments, but read the bears. When the latter start making sense, sell. Corollary: when the bulls become totally full of it, learn how to sell short. In bear markets, follow the bearish arguments, but read the bulls. When they start making sense, cover. When the bears become full of it, go long. BC