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

To: yard_man who wrote (15460)	4/18/1998 4:51:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 18056

tippet, a number of very large "financial" companies are going to make sure they do. Merryl, AGI, Travelers, are all well set up there and just waiting for the opportunity to address the Japanese saver. Most of these savers were never in the market (Japanese or foreign) and thus do not remember the pain of a bear market bringing equities down 65% or so. Furthermore, I am assuming a very slow conversion of 2% per year, that can come from the new generation that did "know Joseph". Last, I am not sure at all that they will go into US equities directly (I do think they will initially go after US bonds, however), but the results are the same, the addition of $200 billion bucks of "slosh" per year. If they buy Bonds, that will leave $200 Billion that would have bought bonds from other sources looking for a place to put their money to work. Remember, if we have even a semblence of a balanced budget this year, about $300 billion of interest on our existing debt will be looking for a home as well. I think that until we get a major recession strongly impacting corporate profits, or we get our markets not to ridiculous prices, but to ludicrous prices, the mania can continue unabated. Once the Dow reach 12,000, I'll have to change my tune to "once we get to exuberantly ludicrous prices" <VBG>. Right now, if we correct the dividend yield for the tax free dividends achieved by corporate stock buy back, we are not even at ridiculous prices. It is another story on the PE front, however. I also think that major parts of the market are extremely discounted and there is a lot of room for rotation, but the indexing mania will probably not allow the efficient market to work that easily. Zeev