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

To: Jay who wrote (10636)	12/9/1997 8:37:00 PM
From: robnhood	Read Replies (2) \| Respond to of 18056

JB,,,the market is within spitting distance of a record high,,,grim??? rr

To: Jay who wrote (10636)	12/9/1997 8:50:00 PM
From: robnhood	Respond to of 18056

Jay,,,cumon now,,,shoulda , woulda, coulda,,, rr

To: Jay who wrote (10636)	12/9/1997 9:04:00 PM
From: Rational	Read Replies (1) \| Respond to of 18056

Jay: I found your following statement thought provoking! Things look pretty grim now - should we be bearish or bullish? Logically, bears (I have none in mind) should be thinking that the bulls are dumb to imagine that everything looks rosy, while the bulls (again I have no one in mind) must be thinking that bears are too stupid to believe that things can get worse. This is an ongoing tug-of-war between bears and bulls that engender an equilibrium market price. This market price is not necessarily a "fair" value of an asset as a professor of finance can comfortably claim in an MBA class. In fact, professors of finance (notably Grossman and Schiller) have shown, in well-cited empirical research, that stock prices are not the discounted expected future streams of dividends, which they should be. Of course, this outright condemnation of the stock market valuation is somewhat moderated by subsequent research that shows that we observe (at any given time) only a subset of all firms that once operated, i.e., we see only the surviving firms ... Thus, whether or not the situation is grimmer than that the current prices reflect is difficult for a bull or bear to judge, until they bet their money in the tug-of-war to change the price one way or the other! Best of luck to bulls and bears!! Sankar

To: Jay who wrote (10636)	12/9/1997 9:15:00 PM
From: Bonnie Bear	Read Replies (3) \| Respond to of 18056

Jay: Greed and fear are the magic ingredients that make the stock market so interesting. here's an example of how seriously overpriced this market is. These numbers are close to correct: the Dow has a price to book of 5.55, a p/e of 21.2 and a dividend of 1.7%. In 1982 you could buy the dow at close to book value, a p/e of 8 and dividend, oh around 5%. I don't have 1982 numbers but I recall this as being close. Now, a close real estate equivalent is 1982: pay $100,000 for a house, cash, no debt. house has to appreciate 8% next year to get your money back. you can rent it for 5% a year, or $415 a month. But you can get 15% on a government bond, and to take out a mortgage is 17% interest, so you don't. 1997: pay $100,000 for a house, you own 18% and the rest is ious and loans. Gov bonds pay 6% and a mortgage is 8% so you take the 82% mortgage. house has to appreciate 21% next year or you don't get your money back. you can rent it for $140 a month (1.7% of $100,000) It's OK because you KNOW, because the real estate agent told you so, that the house will be worth 21% more next year. Now, compare with something like this listing in a nice northern california beach town. members.aol.com For $77,000 you can buy real property that gives an income of $900 a month. (I'm going to have to take a trip up to Eureka and look around!) Boston chicken bottomed at half its book value, if someone bought the chain the stock price would double. Apple is close to book value. The end of manias historically end like this, with emotional valuations attached to businesses. If you buy a stock at 10X book it implies that temporary loss of its business can cause the stock to lose 90% of its value. P/es are elastic but book values are not. And yields are an indication of cash flow and real profitability. Now, gold is below the price that industrial users are willing to pay for it. Like oil, clean water and natural gas, there is a point where the producers will be undercutting their profits if the price is too low, and the price will rise to meet demand. A scarity of goods or services generally creates price support. When there was a shortage of pentium computers the price was kept high. When there is a glut of new and used pentium computers the price goes down, profit margins go down, profits go down, p/es go down. etc. I'm bullish on real property and bearish on paper assets. I really think REITS are worth buying as it's easier to buy paper than take care of the gingerbread on that cute little Victorian. Sorry to be so long winded. Hope these thoughts help explain my perspective.

To: Jay who wrote (10636)	12/9/1997 10:43:00 PM
From: Simon	Read Replies (1) \| Respond to of 18056

<<<I suppose you are bearish for altruistic reasons>>. NAH, she just likes to run around in her left over 1929 Racoon coat and look like a bear,sound like a bear. Actually she's a Panda Bear.