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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (19294)	5/27/1998 11:22:00 PM
From: Oeconomicus	Read Replies (2) \| Respond to of 94695

Calamity? Spiral down? Did I say these things and not realize it? My point was that if, as you say, "Mr. Market" discounts what's going to happen, not what has happened, then wouldn't the freefall in many markets around the world tell you that things will be getting worse, not better? The US markets had been saying something else, of course, but the market has been known to ignore realities from time to time, even when the truth is staring us in the face. Look, Bill, the world doesn't have to fall apart for the market to come down, but it's beginning to look like much of the world is falling apart. Does that mean that the US will experience an 80% drop in equity values and a depression? Of course not. All I'm saying is that corporate earnings are flat at best, but the market is priced for eternal growth. Furthermore, "flat" could easily be overly optimistic as the symptoms of the Asian flu (weak demand for US exports, competitive pressure on pricing and, therefore, margins) grow and if so, our exuberant investing public may become less so as layoffs, hiring freezes and "voluntary job cuts" are imposed (HWP and AMAT most recently). Now, I find it a little difficult to believe that the US economy will emerge from the current global economic situation unscathed and think that paying 28 times earnings (much more for those outside the S&P 500, large cap, blue chip world) in such an uncertain (but certainly not rosy) environment is simply nuts. All I'm looking for, though, is enough of a decline to 1) bring valuations back at least to the outer reaches of historical norms, 2) instill some real fear into a public that thinks markets only go up, and 3) enforce some discipline and accountability on analysts and money managers that throw money at stocks like Amazon based on rationalizations about sacrificing earnings for market share with no evidence that they will ever produce either. 25-30% on the S&P, with much more on the 'nets and other sectors of excess, should about do it. FWIW, we'd probably get a mild recession as a result, but nothing some tax and interest rate cuts couldn't cure. BWDIK?