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To: IceShark who wrote (38465)	2/6/1999 4:07:00 PM
From: re3	Read Replies (1) \| Respond to of 164687

Damn, I have a medical appointment on Monday...Can we have the crash on Tuesday ? The tape at my discount broker is 1 1/2 hrs behind except for the top 10 traders... My only US longs are boeing and warner lambert, plus a silly purchase of ktel... I would not want to be long more than that, if/until we get a crash/bear...If I was long this weekend of a lot of US stocks, I'd be going out of my mind... thanks... H

To: IceShark who wrote (38465)	2/6/1999 9:56:00 PM
From: larry oertel	Respond to of 164687

Crash? I do believe in regression to the mean. Crash? I do believe in regression to the mean, and if, or when a crash does come the regression will be a mean one. Some interesting comment from longtime Bear Alan in Barrons. "Someone who most emphatically does believe in the wealth effect is our friend Jim Bianco, proprietor of Bianco Research and data demon extraordinaire. In a recent commentary, Jim offers some fascinating evidence in support of the notion that the stock market is exerting a powerful impact on the economy. To illustrate, the nation's equity capitalization is now roughly 150% of nominal GDP, far and away the largest percentage ever. By way of comparison, total market cap at the peak in '87 was around 70% of GDP; in July 1982, on the eve of the start of the bull market, the ratio was a meager 33.5%; at the high in 1972, 78.1%; and at the top in 1929, 81.4%. In short, the stock market has never before loomed even remotely so large in relation to the economy as it does today. Contrariwise, the money supply, as measured by M2, has never been so dwarfed by the stock market as it is currently. Since 1926, M2 has averaged 146% of aggregate equity capitalization. At last reading, M2 was barely a third the size of the stock market. Another way to gauge the mounting significance of the stock market is to stack it up against the bond market. In 1990, the capitalizations of the stock market and the bond market were just about even. By contrast, right now the stock market is 235% larger than the bond market and growing nearly four times faster. These comparisons underscore graphically how the stock market's sheer size gives it an elephantine presence in the economy. It defies simple logic to suppose that anything of such vast magnitude doesn't enormously influence the growth and vitality of whatever it's a part of. Refusal of economists and other duly (or should we say dully?) anointed kibitzers to credit the stock market with the major role it has come to play explains why they've so consistently underestimated the strength and staying power of the expansion. Our own feeling has long been that the day the bull market rolls over is the day you can begin to kiss the boom good-bye. Forget the loony day-traders churning the Internet stocks. Reflect, instead, on the millions of sober citizens who, thanks to 401(k)s, mutual funds or their own commitments, have enjoyed unprecedented material increase in the past couple of decades. They've grown accustomed to an expanding net worth, and their expectations have inevitably expanded as well. And how could it have been otherwise with the stock market suffering only one down year in the last 17? Psychology is treacherous terrain, but again, one can make reasonable inferences from behavior. And the ease with which people take on debt and spend beyond their income, it's fair to assume, has more than a little to do with the comfort afforded by the steady appreciation of their portfolios. Granted, there's no true way to establish cause and effect; so call it pure speculation based on observation and anecdotal evidence, but in light of the widespread involvement in the stock market, we're convinced that never before have the economy and the market been so intertwined, have so many everyday, ordinary household decisions been influenced by perceived wealth. So long as the bull market is alive and well, such confidence will feed the boom. But if, hard as it is to imagine, stocks don't continue their heavenward climb and instead embark on a prolonged descent, the economy is sure to suffer. And a stock component to Social Security (that wonderful chart is an updated version of one we ran two years ago) would only compound the woe. And because it's based in no small part on something as chancy and instantly changeable as a stock price, this virtuous economic circle has the potential to become an especially vicious one. This wonderful boom, to put it another way, can turn into an especially ugly bust. That, we suspect, is at the heart of Alan Greenspan's dilemma: How to burst the bubble without busting the economy. We wish him luck, but we don't think it can be done." Calling a top to this market is a guessing game, but its no guess that when it ends it will be ugly. .