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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: wooden ships who wrote (3706)	3/1/1998 9:24:00 AM
From: Boca_PETE	Read Replies (2) \| Respond to of 42834

Truman: re: < the market from 1966 to 1982 disappointed even the most Panglossian of investors by staying comfortably below DJIA 1000 for most, if not all, of that time period.> Perhaps there were good reasons for the market ceiling of 1966-82: * Guns and butter policies during the Vietnam War. * Civil unrest from war protestors and civil rights protestors. * Assassinations of political and civil rights leaders. * Currency tensions building from the Bretton Woods fixed exchange rate system that lead to Nixon barring Gold redemptions by the US. * Price controls, then wage controls, then spiraling inflation and interest rates beyond anyone's imagination. * Oil shocks in the early and late 1970's resulting in gas lines and a FED that overinflated the money supply. * Russia's invasion of Afghanistan.. * The fall of the Shah of Iran and rise of extremism is Iran (our former close cold war ally where many oil investments were expropriated) that culminated in the hostage crisis with its failed rescue attempts by President Carter. * Nixon disgraced ending in the first presidential resignation, after his Vice President resigned pleading "Nolo contendra" to corruption charges. Followed by two weak presidents (Ford and Carter). * The major bear market of the mid 1970's and a few recessions along the way. I'm sure I've omitted items from this recounting of a very grim period in American economic and political history. Reviewing these items makes one REALLY appreciate the much calmer and positive times we are living in now. I believe the absence items such as listed above removed the market ceiling and permitted investors to value stocks base on fundamentals (Earnings per Share, and, P/E ratios). If we were to return to an environment similar to the period you describe, I'd expect the stock market to react in a similar manner. Also during the 1966-82 time frame, I would think that one needs to note that a rise in the market from 577 to 1000 represented a large percentage gain. Unfortunately, a tumble from 1000 to 478 also represented a large percentage loss if you were unfortunate enough not to get out near the top. P

To: wooden ships who wrote (3706)	3/1/1998 10:21:00 AM
From: Gary D	Respond to of 42834

>>With a market reverting to the historical mean, which modus/i occupandi would large segments of the investorate choose?<< Truman, I hope we hear BB answer that question. Maybe if the market reverts to the historical mean without first enduring a bear market, changes in investment patterns would be gradual. In such an environment, a new set of formerly conservative investors might be tempted to assume more risk. The smaller number of high-flying stocks in such an environment would be much more conspicuous, and could be tempting to investors who otherwise would be in an index fund. I do predict that the sharks will see their business pick up and could do quite well as the market cools off. It will no longer be wise to short Wade Cook's stock (if it's still around).

To: wooden ships who wrote (3706)	3/1/1998 12:56:00 PM
From: Investor2	Read Replies (1) \| Respond to of 42834

RE: "With a market reverting to the historical mean, which modus/i occupandi would large segments of the investorate choose?" Two observations. First Observation: The answer to the above question may depend on the definition of "reverting to the historical mean." To illustrate, let's consider the hypothetical case of "reverting to the historical mean" over the next five years. Over the last 70 years, the average return was slightly more than 10%. Therefore, one possible interpretation of "reverting to the historical mean" for the next five years is averaging approximately 10% per year for that time period. However, there is another possible interpretation of "reverting to the historical mean." Perhaps, the market return over the next five years, when combined with the return of the past five years, will result in an average annual return of 10% for the 10-year period. In this hypothetical scenario, the total return over the next five years (1998 through 2003) would need to be negative in order for the period from 1993 through 2003 to average 10% per year. My guess is that if the first of the above scenarios plays out, and the average return over the next five years is 10%, the "investorate" will continue an investment style similar to the recent past. On the other hand, if the second scenario plays out, and we experience a period similar to 1966 - 1982, the "investorate" will simply avoid equity investments in all forms. Second Observation: It is probable (not certain) that the health care and technology sectors will outperform the overall market if market returns slow or go negative. Best wishes, I2

To: wooden ships who wrote (3706)	3/1/1998 7:50:00 PM
From: wooden ships	Read Replies (2) \| Respond to of 42834

Today Bob Brinker pondered whether the stock market might be poised for what he termed, to recall it, a "short term correction or consolidation" following its dramatic "parabolic rise" of late. Such a pullback, deemed "healthy", would prepare the way, per Brinker, for new all time highs. Parenthetically, I thank all respondents for their well considered opinions pursuant to the question of the major market "reverting to its mean." Quite illuminating, very useful, and a fair example of the Brinker thread at its best.