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

To: Pierre J. LeBel who wrote (23988)	8/11/1998 11:34:00 PM
From: James F. Hopkins	Read Replies (3) \| Respond to of 94695

Pierre; On the surface your analysis looks reasonably sound, but roll back the covers and you find. (1) The major indexes are always enhanced over time, to give people the impression the market is doing better than it really does, after all they want to sell stocks, and make it look as enticing as they can. Momentum stocks are pulled into the indexes while under performers are dropped out. None of the stocks that go belly up and get de-listed are subtracted from the wonderful looking performance of the indexes. (2) You say 5000, NO BIG DEAL..let me tell you before you ever get there that kind of drop will have people making a run on stocks, and it will explode worse than a run on any bank, just how many people do you think can get out of the market before it melts down. Below 8000 and you can go into melt down stage pal, 7600 is max unless you think a Three Mile Island type melt down is nothing. Don't forget the SEC damm near threw away the the stop triggers, when they let that 10, 20, 30 go into effect. That was a very extreme and stupid move on their part. (3) If you want to surmise on how John Q public has been making out in the market , Take ALL the equity mutual funds and get the aggregate gain, to form a mean average. You will find it is not nearly as rosy as the indexes would have you believe. (4) You say , Investors cannot expect a 20% or 30% return from equity year after year when the economy grows at less than 5% during the same period of time. Well to start with that has nothing to do with what many of them do expect. On top of it very few of them 10% maybe have made close to that, so a lot of them are not so thrilled as you might think. (5) A drop to the 5000 level would not give but a handful of people the 7% annual gain you figured, and you might get a rough idea of the new participation in the market since that time frame by looking at the volume. My guess is over 50% would suffer huge losses, and the fine budget surplus would reverse so fast that the government could get right back were it was not so long ago, " when there was real fear that we would not be able to service our national debt and Bush with his trickle down economics, had to damm near shut down the government. (6) Don't even think about a drop to the 5000 level, if it starts headed there it won't stop , not before the 3000 level, if there. Pension funds will be gone, insurance companies broke, and we may be asking Russia to lend us money. You have never seen a melt down once it really starts, there is now damm near no way to stop it. If you read up on the inside stories about the 87 crash, while people make little of it now, there was total panic behind the scenes, and you had much better seasoned fund managers then than now. Just because it didn't completely melt down that time , doesn't mean it wasn't very very close to it. Jim