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Strategies & Market Trends : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: J. P. who wrote (2657)	2/27/1999 9:56:00 PM
From: Kailash	Read Replies (1) \| Respond to of 3339

Some straight talking from a bearish money manager - 02/26/99:"Market Monitor"-Robert Drach PAUL KANGAS: My guest market monitor this week is Bob Drach, the editor and publisher of the Drach Weekly Research Letter based in Key Biscayne, Florida. Welcome back to NIGHTLY BUSINESS REPORT, Bob. ROBERT DRACH, PUBLISHER, DRACH WEEKLY RESEARCH REPORT: Good to see you again, Paul. KANGAS: Well, this was sort of high-tech wreck day and it was a bad one. The averages didn't look that bad except for maybe the NASDAQ but this is the group that's been leading this market higher. What does this mean when we see this type of terrible erosion? DRACH: Well, it's been wreck day for a lot of areas. I think the high techs for a long time. The underbelly of this market's been eroding since April if you look at the advance declines on the New York Stock Exchange. But fewer and fewer stocks holding the averages while the underbelly has been kind of ripping. KANGAS: And the NASDAQ has even had a worse advance decline ratio. DRACH: Oh, the advance decline on the NASDAQ's been going down since 1996. KANGAS: Are we talking about the precursor to a major market collapse here or what? DRACH: I don't think so because you already have the undermarket, the widely-based market down. The average is up. You have these high-tech stocks that got all the speculative money up. And they're just getting their spanking long overdue. KANGAS: But what about this threat of higher interest rates? That's competition for... DRACH: Oh, I find this very interesting. Interest rates are almost where they were last August. KANGAS: That's right. DRACH: That's before the Fed lowered rates three times. I think the importance of that is that the Fed is going to have difficulty lowering rates again to support equity prices. Last fall it was pretty obvious they would lower rates. But now they got too big a spread with it. So don't rely on Mr. Greenspan to bail out the equity market this time. KANGAS: So who is going to bail it out if anybody? DRACH: Well, with the stocks depressed, you can get professional buying. You know the market's fundamentally high. You don't have support there. You know the Fed is not going to jump in to support it this time. You have the public's speculative mess, which has created all this pricing divergences. But the turnover rate on the New York Stock Exchange last year, as a percentage of the total outstanding shares, was 76 percent. The only time in history it was greater was 1929. You've had this massive speculation. So you've got these new groups up. But what's happened to the stocks that are down are the ones that are up, there is no fundamental differentiation. If you take the A+ stocks for Standard & Poor's and say how have they fared, they're no better than the average junk stock as far as percentage up or down. KANGAS: So what's your strategy? DRACH: Well, we're 90 percent cash. nightlybusiness.org