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

To: yard_man who wrote (28448)	9/20/1998 8:41:00 PM
From: Bull RidaH	Read Replies (1) \| Respond to of 94695

Tippet, <<One question: Why are you convinced that the '29 crash will be so similar in nature to an upcoming crash if and when it occurs?>> For the following reasons: 1) The 7/20 peak completed a 16 year supercycle...& possibly a grandsupercycle from the 1942 low. When markets come to that juncture , history proves that a fear driven collapse is emminent, of which we've experienced the first rains. 2) Valuation excesses and the speculative frenzy we have just witnessed have exceeded all others in modern (post 1900) history. Valuations at 150% of GDP and S&P 500 P/E ratio of 29 are proof. Historically, at this stage of the business cycle (peak in, heading down), TRAILING P/E's have been in the 12 to 14 range, not the 25 that we have now. Then, once we're in the middle of the recession/depression, and earnings continue to deline, the P/E is allowed to rebound to the high teens, low 20's based on expectations for a turn. Both great crashes ('87 & '29) were a result of this phenomenon (too high a P/E late in the business cycle), and the '98 P/E at cycle peak makes those two former incidents look like mole hills. 3) This collapse is being preceded by currency crisis in other countries, just as in '29. It's also being preceded by commodity deflation, just like '29. One difference here though... This time, we're lugging around $5.5 Trillion in stated U.S. debt, record consumer and corporate debt levels, and we've got a government who couldn't manage to run a surplus in the greatest economic expansion the world has ever seen ('82-'89...'91-'98). What will our deficit be when growth halts, or even declines, and people go off the work payrolls and back on unemployment handouts. 4) The Glass-Steagall Act and its taxpayer/depositor safety mechanisms were gutted, and Banks got caught up in the speculative frenzy as well. Solvency for U.S. Banks could easily become a serious issue, thus the stern Federal Reserve warnings to U.S. Banks of late. 5) Corporations blew much needed capital required to maneuver through an economic downturn on overpriced stock repurchases (so that executive and employee stock options would be as valuable as possible). 6) Corporations gave away the store, not to customers but to executives and employees via excessive stock option programs, compensating people with millions for doing the same job they once did for normal salary + bonus 5 to 10 years ago. The dilutive effects of these stock giveaways will not be seen until panic selling brings these shares out of the woodwork. Will the market makers really want to give employees/executives a "golden parachute" out of their holdings by absorbing that supply at high prices when the panic hits? Not on your life!! Those billions upon billions will stay in the mm's pockets, and will be erased from the employee/executive's paper profits. I could really go on & on, but those are my main reasons for believing the coming crash will be of the magnitude of '29. And this belief is not something new that I recently concocted. If you check the first post I wrote on this thread back in January (#13322), You will see a comment calling for a summer explosion up that would peak in the Mid July time frame (7/13 to be exact...['98, not '97..I'm such a typo freak!]), and it gave the exact methodology I used to forecast the peak. I predicted that the high made in that timeframe would be a multiyear high. Heck, I'll just pop a link in here so you can go back and check it for yourself. Message 3201196 Regards, David