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Strategies & Market Trends : Investing during a Bear Market -- Ignore unavailable to you. Want to Upgrade?

To: studdog who wrote (218)	11/15/1997 7:38:00 PM
From: Bearded One	Read Replies (1) \| Respond to of 226

I have a timing problem with your numbers. I would think that you want forward earnings for the S&P, but current bond yields for your 10 year note, since the current yield is what you're going to get. On that assumption, it's not 47.50/0.055 but 47.50/0.585 = 818. In any case, however, I think that in a deflationary environment, earnings can drop dramatically, and maybe even go negative. Especially given that I believe lots of earnings are pretty fake. BWDIK

To: studdog who wrote (218)	11/16/1997 11:25:00 AM
From: Tommaso	Read Replies (1) \| Respond to of 226

Hi Karl! First, a link: members.aol.com Lots of information here, especially useful for when the time comes to get back into the market. But also, the historical information helps put the present in perspective. As perhaps you realize, I remain a lot more bearish than you. Not pessimistic, because I think that the worldwide gains in productivity, in medicine, in technology, and even in less tangible things like economics and diplomacy--all these things are making the world a better place to live in every day. As long as they aren't used to kill or tyrranize over people. But this happy prospect is, I think, already discounted by as much as 50% by the stock market. Maybe what's needed is analysis of the secular rise in what is a "reasonable" P/E and the secular decline in what is a "reasonable" dividend return on common stock. In some ways bonds and stocks have reversed roles, with bonds considered as hostages to inflation and interest rates, whereas under hard money stocks were hostage to deflation and the safety offered by currency. We keep hearing about the risk of stocks but perhaps forget what happened to holders of 3 percent treasury bonds when interest rates on new bonds went to 12 percent and beyond in the 1970s. To me, your estimate of possible market decline of stocks still seems very conservative. I agree with you in that at the levels you mention, I will sell my BEARX and cover my short positions. But unless I am extremely confident of what I am doing I won't be back in the market, except for oil stocks, unless it goes about twice as far down as you foresee. But all this depends on constantly-changing variables.