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

To: lurqer who wrote (9572)	11/18/2002 6:45:34 PM
From: lurqer	Read Replies (1) \| Respond to of 89467

Definitions II In Definitions I Message 18248564 I covered some definitions that I believe have caused some misunderstandings. In this post I’d like to cover one more. During the mania, although there was some discussion of a bubble, there was far too little. Now that the mania is past, bubble talk is in vogue. With common agreement that a market bubble occurred, now the discussion is about when the “deflation of the bubble will end”. A chart of the Comp from say 1990 to the present will revel that the peak at March ’00 has already been largely retraced. So has the bubble been deflated? Again it depends upon your definitions. Certainly a lot of “air” has been expelled from the bubble. The problem is momentum. Just as excessive momentum from a secular bull can be viewed as triggering the mania, so downward momentum will continue long past any “fair value” valuation point that existed prior to the start of the mania bubble period. Moreover, by any “reasonable” definition of earnings we have yet to reach even “fair value”. Part of the problem may come from using a Comp chart. Many companies have simply been delisted since the mania peak. Could this distort the degree of price deflation? Perhaps a S&P500 or Dow chart should be used. Unfortunately for the LTB&H group, those charts look like they “have ways to go”. So, it’s possible to define the bubble such that the “deflation of the bubble will end” soon. But that in no way means the deflation of market prices is anywhere close to an end. If history is any guide, prices will stop deflating when P/Es are in the 7 to 10 range – not before. All JMO lurqer