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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (7415)	11/7/1997 11:00:00 PM
From: Bilow	Respond to of 18056

Options an important part of speculative booms: As noted, at some point in the growth of a boom all aspects of property ownership become irrelevant except the prospect for an early rise in price. Income from the property, or enjoyment of its use, or even its long-run worth is now academic. As in the case of the more repulsive Florida lots, these usufructs may be non-existent or even negative. What is important is that tomorrow or next week market values will rise - as they did yesterday or last week - and a profit can be realized. It follows that the only reward to ownership in which the boomtime owner has an interest in the increase in values. Could the right to the increased value be somehow divorced from the other and now unimportant fruits of possession and also from as many as possible of the burdens of ownership, this would be much welcomed by the speculator. Such an arrangement would enable hin to concentrate on speculation, which, after all, is the business of a speculator. Such is the genius of capitalism that where a real demand exists it does not go long unfilled. In all great speculative orgies devices have appeared to enable the speculator so to concentrate on his business. In the Florida boom the trading was in "binders." Not the land itself but the right to buy the land at a stated price was traded. This right to buy - which was obtained by a down payment of 10 per cent of the purchase price - could be sold. It thus conferred on the speculators the full benefit of the increase in values. After the value of the lot had risen he could resell the binder for what he had paid plus the full amount of the increase in price. The worst of the burdens of ownership, whether of land or any other asset, is the need to put up the cash represented by the purchase price. The use of the binder cut this burden by 90 per cent - or it multiplied by tenfold the amount of acreage from which the speculator could harvest an increase in value. The buyer happily gve up the other advantages of ownership. These included the current income of which, invariably, there was none and the prospect of permanent use in which he had not the slightest interest. The Great Crash 1929 by John Kenneth Galbraith page 18-19 -- Carl

To: Zeev Hed who wrote (7415)	11/7/1997 11:58:00 PM
From: Bonnie Bear	Read Replies (1) \| Respond to of 18056

Zeev: we have started to see the inevitable result of a decline in tech stocks that should grow in a few weeks: we will see an increase in layoffs, reduced consumer spending, and increase in foreclosures. As the asians continue to sell off their huge holdings of stocks the markets will go down. So I'm set up as a sell-and-hold investor: I hold mutual-fund short portfolios that short techs and smallcaps, RYURX (S&P short) bought at 980, a few overvalued shorts matched with undervalued longs, and short-term SPY short I bought at 935. Nothing radical here, and I can short-term trade MDY long if bullish tendencies show up. I'm not so confident of interest rate direction. The stream of pension-plan money will continue unabated so companies will have to create value through dividend increases, mergers and acquisitions, and layoffs. And an occasional large kahuna will come through to claim some profit for the bears. I like to use SCH as a proxy for the mutual-fund growth prospects and financial sector overvaluation, SCH at p/e of 40 is high.