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To: Bill Harmond who wrote (8509)	3/18/1998 10:45:00 AM
From: Oeconomicus	Respond to of 27307

Bill, I didn't say it would "end overnight". BTW, the '29 crash was not caused by bank failures or deflation; those came later. As for 1961-62, an overvalued market can use any excuse to correct. A shock is just that because no one expects it. Then, it was Bay of Pigs. At other times, it was failed high profile mergers. But 1962 was really a correction, though a sharp one, in a bull market. It took the excesses out of the market and cleared the way for a more sustainable climb. Perhaps that's all we need, but a 10% correction won't do it. OTOH, major industries that have led the market for some time are suffering from inventory gluts, deflationary pressures from abroad, slowing demand even outside of Asia. There are imbalances, but they are, for the most part, being ignored. We are hardly assured of avoiding a recession and the market generally doesn't wait for proof of a recession before turning lower. It usually leads. As for oil, remember, this is a global economy. We are not just talking about Houston losing and New England gaining. We are talking about the Middle East, Venezuela, Indonesia, former Soviet Republics, and the largest oil producer of all, the good old USA. We are also talking multiplier effects BTW. As for bond yields vs. earnings yields, a 17 bond PE vs the market's 27 or 5.9% vs 3.7%, you are right that there is no "g" in the equation for bonds, but you forget that for stocks the "k" is a lot higher and "g" is in doubt. Perhaps all we'll get is a healthy 20% correction; I hope so. But the bigger the bubble gets, the bigger the mess when it bursts. And it will burst. Bob