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To: tekgk who wrote (12426)	12/28/1997 12:34:00 PM
From: gianelda	Read Replies (2) \| Respond to of 18056

read this : from MF Subject: mutual fund investor re-acts Author: prichards Date: 12/26/97 11:33:10 PM (ET) as my first post here highlighted, "the media is the message" and it's affect on the markets before Oct 97 and now during its decline. phase 1: denial late Oct/97 the media denied any asian effect in the US, investors bought on the dips. phase 2: asian alarm rings louder the extent of the financial damage starts to unravel, the white house & Fed become alarmed by calls from Japanese & European banks. the media reports the asian mkt swings. analysts continue the hype of santa claus /january effect arrival. phase 3: earning warnings first a dribble from techs, which eventual spread to other sectors, causing wild mkt swings and the media reports all of it. phase 4: equity fund withdrawals the anecdotal evidence of investor alarm started this last week as his fund units show large declines. fear hits investors, as they withdraw $9.5 B from equities this past week. what's important now is to understand the asian crisis affect on the market becomes secondary to a cycle of ever mounting fund withdrawals as more warnings are issued. This is also spurred by media editorials to withdraw as advised in the business editorial in Saturday's Toronto Star. phase 5: continued selling The markets decline,(how fast or how much is anyones guess) but the investor is now ripe, reversing his course fleeing the mkt. he's simply re-acting to the media with a constant bombardment of lower corp earnings hitting the tape. phase 6: fund investors lose control even with the immediate threat of Korean default averted by banks extending or re negotiating the loans Japan's economy continues to decline and becomes pivotal. US companies can not fire up earnings as the asian resolution develops into a protracted crisis of confidence, globally. fund investors who were sheltered until this point by renewed media reports of calming by bull stalwarts, realize they have lost control of their investments, as funds start to liquidate & dissolve. phase 7: 10-20 years of flat market performance. boomers have realized the highly paid fund managers were too young & inexperienced, mistaking bravado for confidence. after all it wasn't their retirement savings at risk, not even their 6 figure salaries but simply the size of their bonus. Investors shun the equity markets in order to preserve what's left of the retirement savings and return to 'safe' investments. the media was the message, not the new paradigm

To: tekgk who wrote (12426)	12/28/1997 12:37:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 18056

Tek: I am not saying that secular bear markets are dead. I think that my reading of the global socio-economical situation is slightly different than yours. All the points you have made are indeed correct, but the resolution of the problems as you see them and as I see them are slightly different. For instance, I see the sorrow state of affairs in the former soviet union as the typical chaos during the stage of "capital accumulation". In order to create a capital based economy, capital concentration seems to be an important ingredient. In different countries this process has taken different shapes and most often involved corruption and transfer of wealth from the poor to the rich. Take Korea, the current problems is the end stage of the capital concentration process there. It has taken 30 years for the Chaebols to build their empires with reckless borrowing (supported by the central corrupt government). During this process some of the capital was misappropriated and directed to inefficient economical activities creating spots of over capacity. If I believed that this excess capacity cannot be absorbed by partial write offs of the excess and partially by the expansion in the demand base of the world's economies, I would join the clan of permabears believing that a secular bear market is imminent. However, I think that demand can be expanded to meet the excess capacity, one of the major reason I have stated on this thread ad nauseum, that Japan should use those 30 trillion yens to cut taxes not pay for bankers mistakes (and I fully expect Sukakibara to swalow his irresponsible statement about not letting banks, financial institutions and companies going under, or else, the Nikkei will find its way to 12000 before spring knocks on our doors). I think that China will gradually move to a less centralized economy (and in the process undergoes a capital concentration process of its own, where "warlords", or other well placed individuals will rob the country of its capital resources, through various processes of "privatization"). If I was a "capatain" of any of these transitional economies, I would have handled the process of privatization quite differently, yet the need for capital concentration is necessary if countries are going to each find their respective niches which best suit their economical activities. I see the current overcapacity problem as no worth than than a cyclical event, and since I do not see a major mechanism for drastic reduction in final demand, but on the contrary, an increasing addition of a larger portion of the world's population "joining" the consumer society, my current stand of a cyclical bear market remains unmodified. Tek, I have been wrong before and will be wrong again, so take these statements with one or two grains of salt. Zeev

To: tekgk who wrote (12426)	12/28/1997 1:17:00 PM
From: Jack Clarke	Read Replies (1) \| Respond to of 18056

Tek: Hard not to agree with your market assessment, as usual. One question in behalf of the mathematically challenged: What is the advantage of the log scale for the constant dollar DOW chart, which is indeed elegant in its simplicity and future implications? I have had this explained in the past but am mentally blocking it now. Thanks. Jack