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To: Oeconomicus who wrote (8508)	3/18/1998 12:32:00 AM
From: Bill Harmond	Read Replies (1) \| Respond to of 27307

>>1961...1972...1929 Each of these markets had divergences before the top, and there were fundamental imbalances in the economy. Bull markets don't end with simultaneous new highs in breadth. Bull markets don't end with the financial stocks leading higher. Bull markets, most importantly, don't end overnight. The stock market is not monolithic. Groups are correcting all the time. Look at energy and semiconductors. You can't make a macro projection for the overall market unless you look at the market from the bottom-up. If I remember correctly, 1961 saw the Bay of Pigs crisis and the US Steel affair. 1972 saw a huge inventory bubble in finished goods, plant and equipment, and commercial real estate. That was followed by the winding down of the Vietnam War, the first oil embargo and Watergate. 1929 was a completely different world from today...90% margin, no checks and balances, no deposit insurance, deflation caused by unwinding debt and thousands of failing banks. The markets are globalized now. Money moves around the globe at will. Right now the flows are toward our shores. Memories are too fresh in the developing world, the wealthy overseas are sending funds here, and all the fiscal and monetary background here is green. It's too early to be bearish. Your time will come. It always has. Just not with the current background. S&P Dividend discount models are showing the S&P overvalued by a few percentage points. It needs to get to 20% or so before trouble sets in. That high PE you point to now reflects retained dividends and companies that are addressing global market opportunities. Productivity is good. The bond market rally has provided immense liquidity to the stock market. The bond market is several times larger. The bond market is selling at 17 times earnings, and there's no growth at all. >>What if oil does go to $10/barrel and stays there for a while as many analysts suggest? Bad for Houston. Great for the Northeast and the West...where most Americans live, heat, and drive. Relax and play groups. Unlike previous times the stock market is a store of generational retirement savings...it will take alot to shake it lose. I'm one of the oldest War Babies, most men my age won't be retiring for 12-15 years, and they're saving like hell right now because they've woken up behind the curve. General prosperity is not necessarily a bad thing, even for stocks. It is certainly a terrible environment to be timing short sales.